Asia Pacific
Economic
Outlook
May 2013
China
India
Malaysia
Thailand
The growth picture
China’s government reported that, in the first
quarter of 2013, real GDP was up 7.7 percent from
a year earlier. This was slower than expected and
slower than the 7.9 percent growth recorded in
the fourth quarter of 2012. This is the first time in
20 years that growth has been less than 8.0 percent
for four consecutive quarters. Growth of fixed-
asset investment, while strong at 20.6 percent, was
worse than the market expected. China is clearly
becoming a more mature economy with growth
that is more consistent with middle-income
affluence. So while many people will long for the
blistering 10–12 percent growth of the past, it is
entirely normal that China would shift to a lower
rate of growth, especially as labor force growth
has basically ceased. Thus the rapid growth that
was needed to absorb new entrants into the labor
force is no longer an issue. The government is
projecting growth of 7.5 percent going forward.
The real question is whether even this level can
be sustained given the severe imbalances in the
Chinese economy.
In addition, there is the question as to whether
the growth will continue to come from govern-
ment-financed investments in infrastructure, or
from domestic demand—principally consumer
demand—that is needed for a sustainable growth
path. It is not clear at this point if China is going
to make that transition anytime soon. In any
event, financial markets were disappointed with
the Chinese figures, especially as growth came in
lower than the market had predicted. Indeed the
market was hoping for acceleration in growth.
Equity markets across Asia declined on this news.
Going into the second quarter, there are signs
of weakness:
• In April, industrial production was up 9.3 per-
cent from a year earlier, and retail sales were
China
By Dr. Ira Kalish
Asia Pacific Economic Outlook—May 2013 1
up 12.8 percent over a year ago—both figures
represent a slowd