That China didn't replicate this achievement in London (or that Team GB topped all expectations on the medal front) isn't a surprise, given the statistically well-documented effect of home advantage. And while the 'mere' 38 golds won by China this year may have been met with disappointment in some quarters of the Middle Kingdom, the country will surely turn up the throttle on funding to make sure it doesn't fall behind the resurgent USA when the games heads to Rio in four years.
After a recent raft of weak economic data, that's a strategy it's likely to employ to give its economy a much-needed jolt, too. China's GDP growth may still be powering ahead of its Western counterparts, but fears of a hard landing were not eased by poor manufacturing PMI numbers reported at the end of July, or a fall in factory gate prices. As a result economists are hopeful of further policy stimulus in the not-too-distant future, in particular cuts to both the banking reserve ratio and benchmark interest rate, which Chinese economic policymakers hope will encourage its banks to lend. There has even been talk of another gigantic stimulus package, akin to the near $600bn it pumped into the economy in the wake of the credit crunch.
However, just as Chinese athletes don't compete in a vacuum, so the fortunes of its economy remain closely tied to the relative success of other nations, and that means buying its way out of its slump may not be an option. China is still an export led economy, which is why the sharp slump in export growth in June from 11.3 per cent to a mere 1 per cent year-on-year is a worry. Capital Economics noted an 8 per cent drop in shipments to the US - the steepest drop since November 2008 - as a particular concern, as a resurgent US had previously proved a buffer to a retrenching Eurozone, where conditions don't seem to be improving. Imports for "processing and re-export" haven't moved for a year, which also has worrying implications for commodity prices. In short, Chinese policy easing or fiscal stimulus is unlikely to ease the economic plight of its major customers.
Efforts to boost domestic consumption aren't working quickly enough to compensate, either - retail sales in July climbed 13.1 per cent, a touch shy of analysts' expectations, while import growth slipped from 6.3 per cent in June to 4.7 per cent, well below the 6.5 per cent economists had expected. That weakness has come despite falling inflation, a measure which looms large in the minds of Chinese consumers, and the added worry is that inflationary risks are now on the upside as the US drought threatens to drive global food prices higher. Although Gerard Lane at broker Shore Capital believes that China will not repeat last year's mistake of policy tightening in response to what he describes as "transient food related inflation", the spectre of inflation could restrict leeway to increase stimulus. Policymakers will also be wary of further stoking up its already red-hot housing market.
Of course, China's burnout has been long predicted, but yet to happen, and many suggest the Chinese economy is merely stabilising at a lower, albeit still high level. Even so, anyone pinning their hopes upon a continuing Chinese gold rush may be severely disappointed.
Chris Dillow will be returning from annual leave on 16 August.
