China at 'End of an Era,' but No Hard Landing

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China's economy slowed for the seventh-straight month in the third quarter to 7.4%, down 0.2% from the previous quarter, and its slowest rate since the first quarter of 2009.

While China's latest GDP reading is spectacular compared to America's paltry 1.3% second quarter GDP growth rate, the single-digit growth is disappointing compared to China's three-decade history of double-digit growth.

As China's growth decelerates, many on Wall Street are worried about a hard landing in China.

"This does, so to speak, mark an end of an era," says Barry Bosworth, senior fellow at Brookings Institution. "[But] I think China has lots of room to maintain its growth, stabilize it, but it has to shift the emphasis" to focus on its domestic market.

Related: Don't Count Out China: 'Hard-Landing' Fears Overblown

In light of China's negative GDP figures, there were some bright spots in other September data released Thursday:

  • Industrial production increased 9.2% from a year ago and 3% from the previous month.
  • Retail sales jumped 14.2% from 2011 and 1% from August.
  • Fixed asset investment rose 20.5% year-to-date.

"An important contributor to the retail sales growth was household electronics which appear to have been boosted by government stimulus packages to encourage energy saving appliances," writes BTIG chief global strategist Dan Greenhaus in an email. "Also of importance, fixed asset investment, still the driver of Chinese GDP, came in at 20.5%, slightly above the 20.2% expected."

Both the IMF and World Bank have reduced China's growth prospects for 2012. The IMF is forecasting a 7.8% growth rate for the world's second largest economy (behind the United States). The World Bank predicts China will grow at 7.7%.

"In the grand context of a global recession, this is an amazingly good job for a country that is so dependent on exports to the global economy," says Bosworth. "I think we are in a world where China's growth is going to moderate and I think it will stay in the range of about 7% to 8%."

China's target growth rate in 2012 is slightly less optimistic at 7.5%, but the country believes it is in line to meet that level of growth.

"Exports have gradually recovered, consumption has grown steadily, price inflation has clearly receded, the job market has been very good," said Chinese Premier Wen Jiabao. Recent export data released for September was surprisingly positive — almost double analyst expectations.

Related: America vs China: "Free Trade Is Only for Friends"

"China's growth for several years was very dependent on exports," says Bosworth. "I think that is now over and simply cannot be supported anymore by growth in the global system."

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