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China economy continues slump

– China’s leaders face new pressure to stimulate a slowing economy after growth fell to its lowest since 1991, hurt by weak trade and efforts to cool a credit boom.

The world’s second-largest economy expanded 7.5 percent over a year earlier in the three months ending in June, down from the previous quarter’s 7.7 percent, data showed Monday. Growth in factory production, investment and other indicators weakened.

The fifth straight quarter of growth below 8 percent is “a clear sign of distress,” said IHS Global Insight analyst Xianfang Ren in a report. With investment weak, she said the economy might be “at risk of stalling.”

Analysts said growth could fall further, adding to pressure on communist leaders who took power last year. They are trying to shift China from reliance on exports and investment to slower, more sustainable growth based on domestic consumption.

Chinese leaders are likely to launch new stimulus to hit their 7.5 percent growth target for the year, said Credit Agricole CIB economist Dariusz Kowalczyk.

“We will see some targeted measures to stimulate growth,” said Kowalczyk. “They have to do something. Otherwise they will miss their target. And they cannot afford that, because this is their first year in power.”

A decline in Chinese economic activity could have global repercussions, denting revenues for suppliers of commodities and industrial components such as Australia, Brazil and Southeast Asia. Lower Chinese demand already has depressed prices for iron ore and other raw materials.

A stimulus would temporarily set back Beijing’s reform plans by reinforcing reliance on investment to generate jobs.

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