Only Reforms Can Revive Growth

China's April economic data continue to show deceleration. The odds are that the slowdown in the second quarter is more dramatic than in the first. Imports didn't rise in April, exports rose by 4 percent and electricity consumption rose by 3.7 percent, but retail sales still increased by 14.1 percent. The data suggest weak external demand, decelerating investment demand and some inventory destocking, but still-robust household consumption.

External demand is obviously weak and may not improve in the foreseeable future. The European debt crisis is still raging. If Greece pulls out of euro zone, it may make debt financing more difficult for Italy and Spain, causing further weakness in European demand. The U.S. economy is growing at about 2 percent and unlikely to accelerate in the next two to three quarters. Emerging economies are all cooling due to inflationary pressure, tightening financing conditions and weakening exports. China is lucky to have export growth at all.