Chinese economic slowdown in second half of year exceeds official expectations; there are signs of deflation.

Netease Financial News reported on Sunday July 26, 2015 that Shanghai University of Finance and Economics Institute for Advanced Studies forecast a decline in economic growth the second half of this year that may be higher than official estimates. The government’s projected annual economic growth rate of 7 percent cannot be achieved. China’s national economy has begun to show signs of deflation, the risk is still large.

These conclusions are from the Shanghai University of Finance and Economics Institute for Advanced Studies “Analysis and Forecast of China’s Macroeconomic Situation,” issued in Shanghai Sunday July 26, 2015. Drawn from “China’s Mid-2015 Macroeconomic Situation Analysis and Forecast Report.”

According to official statistics, estimates were that China’s GDP growth in the third and fourth quarters of this year would be 6.6 percent and 6.8 percent, and the annual growth rate was projected to be 6.85 percent. But according to corrected statistics, the real rate of growth was far lower, 6.2 percent and 6.3 percent in the third and fourth quarters and 6.3 percent for the whole year.

A more pessimistic macroeconomic estimate is that if the U.S. Federal Reserve raises interest rates, even if only in emerging economies demand for Chinese exports in the second half will decrease by 15 percent. At the same time there is a danger of international hot money fleeing China and exposing the flaws of the entire financial system. Official statistics projected third and fourth quarter and annual GDP growth rates to decline: 6.3 percent, 6.5 percent and 6.7 percent respectively. The corrected growth rate is lower, 5.9 percent, 6.1 percent and 6.2 percent respectively.