Back in February I highlighted a short paper written for us by Alistair Thornton, arguing that we shouldn't be too sanguine about Chinese growth prospects this year.
On last week's evidence, Alistair was right to be cautious, as the data delivered a swathe of soft economic readings for April. Thursday brought news of weaker than expected export growth and a stall in import growth for that month. Then Friday delivered the weakest reading for industrial production in three years and also saw fixed-asset investment rising at its slowest level since 2002.
All up, pretty much every indicator for April came in below market expectations, sounding a loud warning about weakening growth prospects. Beijing took notice and the initial policy response has already arrived: on Saturday the PBOC cut the commercial banks' reserve requirement ratio by half a percentage point.
How much more policy action will be forthcoming? It depends in part on the extent to which the dip in growth represents China's transitioning to the slightly lower growth trajectory that the authorities have announced for this year, and which is therefore part of Beijing's economic strategy, and how much is the product of the tough external environment and the authorities' overdoing their earlier efforts at domestic tightening.
And, of course, its not irrelevant to the policy process that this bad economic news has arrived at a time when political risk has also been on the rise.
Meanwhile, with more bad news coming out of Greece, including renewed speculation about a euro exit, the global outlook is once again looking decidedly cloudy. As I wrote back in February, living with a world economy that seems to be operating according to Murphy's Law is going to be an uncomfortable experience.
Photo by Flickr user Dennis Kruyt.
