Saturday, April 18, 2009

China's economy "Bottoming out" provides ray of hope

The China Daily reported that China's government foresees a "better than expected" trend in the economy, which follows on the heels of what it characterized as an initial success in implementation of the November 2008 – $586 billion stimulus package. As reported by the National Bureau of Statistics (NBS) on April 16, 2009, first-quarter gross domestic product (GDP) totaled 6,574 billion yuan (or US$960 billion), or an annualized growth of 6.1 percent, though a much slower growth than the 10.6 percent in 2008, and lower than the reported 6.8 percent in the previous quarter. As for industrial output, it rose 5.1 percent year on year with most of the growth occurring in March, which is a reported 8.3 percent growth.. Then there are retailed sales that rose 15.9 percent in real terms, which was up 3.6 percentage point from a year earlier.

During the April 15th State Council executive meeting, which was presided over by Premier Wen Jiabao, it was also reported that investment and domestic consumption rose, which was attributed to being spurred by a healthy and credit-rich banking system.

The views of economists in Mainland China concur with the State Council's optimism.

Cao Yuanzheng, chief economist of BOC International, an investment service affiliated to Bank of China, said many major indices point to a recovery in the second quarter. Dong Xian'an, chief economist of Southwest Securities, a domestic brokerage, said the "nightmare" of the fourth quarter last year seemed to have ended thanks to the "strong, visible hand" of the government. Li Xunlei, research director of Guotai Jun'an, another brokerage, also said the economy is bottoming out. He forecast second quarter GDP growth of 7 percent. There has been widespread speculation that the government would launch a new round of fiscal stimulus, but with the recent positive signs, it is unlikely that the State Council will do so in the near future, economists noted (China Daily).

Despite the optimistism displaying at the State Council meeting, there were still words of caution, as they recognized that it might be too early to conclude a decisive victory. For instance, although investment and domestic consumption rose, industrial growth remains sluggish, while continuing to show net declines.

The World Bank shares the same optimisim. A study conducted by the World Bank, and titled Battling the Forces of Global Recession, perceives China's bottomoing out as providing a much-needed ray of hope for East Asian and Pacific economies.

Tokyo, April 7, 2009 – As countries in the East Asia and Pacific region prepare themselves for an expected surge in joblessness resulting from the global slowdown, a ray of hope may be emerging with signs of China's economy bottoming out by mid-2009, says the World Bank's latest half-yearly assessment of the region's economic health.

The latest East Asia and Pacific Update, titled Battling the Forces of Global Recession, says a recovery in China – fueled largely by the country's huge economic stimulus package – is likely to begin this year and take full hold in 2010, potentially contributing to the region's stabilization, and perhaps recovery. But with China still heavily reliant on exports to world markets that continue to contract, the Update warns that a truly sustainable recovery in the East Asia and Pacific region ultimately depends on developments in the advanced economies.

In the face of much weaker exports and a slowing down in domestic demand, the World Bank is forecasting that real GDP growth in developing East Asia [1] will reach only 5.3 percent in 2009, down from 8 percent in 2008 and 11.4 percent in 2007. (Last month, in its China Quarterly Update, the Bank downgraded its forecast for China's growth to 6.5 percent this year from 13 percent in 2007.).





Zhang Ran, Economy 'better than expected', China Daily eclips, April 17, 2009.

World Bank: New & Broadcast, Chance Of A Bottoming Out In China Provides Ray Of Hope On An Otherwise Gloomy Horizon, Says World Bank's Review Of East Asian And Pacific Economies, Press Release No:2009/297/EXC, April 7, 2009, [世界银行《东亚经济半年报》说中国经济有望触底,给黯淡前景带来一线希望].

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