China EconTalk: Global issues drag down China's performance

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04:11

China's first-quarter GDP showed stabilization of growth. Frederic Neumann, co-head of Asian Economics Research at HSBC said the GDP is a good guide to give a sense of direction but not the only measure.

Neumann said that relative change is more important as opposed to the absolute measure. The GDP is one among many data, it is probably less important than some high-frequency numbers like exports, retail, and PMI.

The prospect of a deeper slowdown in China has been one of the biggest concerns for the global economy this year. Neumann said China is facing a number of challenges and the world will feel the effects if the country's development slows.

China's growth has been struck by a trade tension with the U.S. and government efforts to rein in a huge amount of debt in China's financial system. Neumann said that the effects of tightening financial conditions weighted on demand like car sales, smartphone sales and construction.

"Everywhere you look, the economy was buffeted by these headwinds," he said, "Domestically we don't know how quickly the tax cuts gain track…Externally, further trade deceleration will add headwinds and put more pressure on domestic easing. Global issues could drag down China's performance."

While China's current economic growth rate is still its slowest in decades, Neumann cited China's policies are playing in the next two or three quarters to arrest the slowdown and lead to marginal acceleration. "Underlying that the structural issues still need to be addressed, but that is a longer time frame if you are dealing with those," he added.