Emerging-market economies In China and other emerging economies, the deceleration in growth in recent months has been greater than anticipated, reflecting past policy tightening, weaker external demand and the challenges of rebalancing to domestic sources of growth. Real GDP in China grew 7.6 per cent in the second quarter – the slowest pace in three years. Recent data suggest continued softening in this quarter.
In part, this reflects a welcome policy-induced slowdown from the increasingly unsustainable rates of growth in recent years. With large vulnerabilities building in the housing sector, evidence of overinvestment increasing, and inflation above target, Chinese policy-makers appropriately responded by tightening monetary and macroprudential policies. Less anticipated has been the extent to which weaker external demand, especially from Europe, has weighed on export growth.