Business

Q&A: Is China heading for a hard or soft landing?

Image caption Some believe China's slowing economy may already have taken off again

There is little doubt that China's economic growth has been slowing down. The question is by how much?

The world's second-largest economy releases its latest gross domestic product figures for the first three months of this year on Friday.

Analysts forecast an expansion of 8.3% for the first quarter, down from 8.9% in the previous three months.

The World Bank also revised down its growth projections for China to 8.2% for 2012, compared with a 9.2% expansion last year.

But what do all these numbers mean?

How serious is the slowdown?

Four economists who spoke to the BBC agree that it is not serious.

"It's more of a natural deceleration," says Robert Howe, of Geomatrix.

"Growth cannot be sustained at 9.2%, let alone in double digits."

China's average growth for the last eight years has been 10%.

"8.2% is within policymakers' comfort zone," says Song Seng Wun, from CIMB Research.

"External demand is weakening, but more importantly, this is a lag effect of the government's effort to slow down the economy."

Richard Jerram, of Bank of Singapore, agrees. "The government has been trying to rebalance its economy to have a better quality growth," he says.

Beijing wants its economy to rely less on exports and has been trying to boost domestic spending.

"Growth is definitely less export-driven," he adds.

"The government has successfully rebalanced towards the domestic engine, but it is still too reliant on investment rather than consumer spending."

The government has been raising the minimum wage across the nation to encourage people to go shopping.

What does that mean in reality?

In fact, one economist says China's economy is no longer slowing down.

"If China's 'slows' to 8.3% in year-on-year terms, it won't be slowing at all," writes David Carbon, of DBS, in his report.

"On the contrary, 8.3% year-on-year growth will imply growth of 9% on the margin, that is, in quarter-on-quarter terms."

"China and many other Asian economies report their growth figures in year-on-year terms but no developed countries have done that since the end of World War II," he adds.

It means China's official growth figures for the first quarter of this year is compared with that of last year.

Instead, the US, Europe and Japan measure how much the economy grew compared to the previous quarter.

"Any time the economy is turning either upwards or downwards, you'll miss that turn - if you're looking at year-on-year figures - by six months," he says.

By calculating China's growth figures in quarter-on-quarter terms, Mr Carbon says the economy hit the weakest point in the second and the third quarters of 2011.

What defines a hard landing?

Opinions vary and there seems to be no definite answer.

Robert Howe says 5% is the borderline, while Rajiv Biswas thinks 6%. Song Seng Wun says below 7%.

"Anything below the government's target" is the view of Richard Jerram. The official target this year is 7.5%.

"The target isn't really a target, it's the minimum that they know they can achieve," he says.

The World Bank expects China's economy to grow by 8.6% in 2013, so from all the forecasts, China appears not to be in for a hard landing.

"The question of a hard landing is moot," says David Carbon.

"China did a touch-and-go three to four months ago and it is now taking off again," he adds.

But Rajiv Biswas thinks that there is still a small chance that China will fail to achieve expectations.

He estimates a probability of around 20%.

Which Asian neighbours are most affected?

Exporting products to China has been a key driver of economic growth for many Asian nations.

"This has increased Asia's vulnerability to the risk of a China growth slowdown," says Mr Biswas.

"The north Asian economies of South Korea, Taiwan and Hong Kong are particularly vulnerable."

"But other Asia-Pacific countries, such as Australia and Thailand, are also exposed, as China has become their largest export market," he adds.

Singapore is another nation likely to be affected.

"The value of exports is 150% of the nation's GDP," says Mr Seng Wun.

"So China's slowdown has already started to affect the city state."

We will find out how much Singapore's economy has been affected when it also releases its growth figures for the first quarter on Friday.