Well, we now know that China’s economy has survived the worst winter weather in 50 years, a surge in inflation and the Tibet problems.
Figures out yesterday showed that China’s economy grew by 10.6% in the first quarter of this year, despite that disruption from ice storms, power cuts to industry and transport in January and February and a sluggish rebound.
The first quarter’s growth was only marginally slower than that in the last three months of 2007, when growth was 11.2%: an outcome that again illustrates China’s resilience in the face of a slowing global economy.
But a direct comparison with last year’s final quarter is difficult, as the government last week revised up the figure for growth in 2007, from 11.4% 11.9%. The new figure suggests that first quarter growth in 2007 was 11.7%, compared to the initial report of 11.1%.
But despite the difficulty in comparing the two figures, one thing is sure: China has not been hurt by the slowing economies in the US, Europe or Japan.
And while the International Monetary Fund expects Chinese economic growth to slow this year to an annual rate of 9.3%, and the country’s Government expects a fall: The solid 10.6% figure for the first quarter (which was above forecasts) shows the deep strength of the economy that will influence Australian growth and interest rates.
But like economies elsewhere, inflation remains a concern: consumer prices hit an annual rate of 8.3% in March, only slightly lower than the 11-year high of 8.7% reached in February. That at least is a fall; not much, but an indication that the price pressures in January and February were driven in part by the impact of the bad weather.
Food prices rose by 21% in the first quarter of this year, accounting for 6.8% of the 8% rise in the consumer price index in that period.
That is something many other countries around the world can relate to. But food price inflation is something that has been evident in China for over a year now as pork, grain and edible oil prices have risen strongly for various reasons.
But the slowdown in growth was driven by the slowing growth of exports.
China recorded its first year-on-year quarterly fall in its trade surplus in the March quarter for three years, which was confirmation of a trend that emerged in late 2007, when the export growth began to wane.
The slowdown seems to be more a case of the surplus stabilising at a high level (an annual rate of well over $US220 billion).
Exports are slowing because of the slowdown in major markets like the US and Europe and the impact of an appreciating currency and the impact of higher costs inside China from a tougher government approach to regulation: environmental controls are being applied more forcefully, interest rates and controls on lending are tougher, and Chinese companies are finding it tougher along the coast to find reliable, low cost labour (In Chinese terms)
Figures from the Chinese Government show that factory and property spending in urban areas grew 26% in the March quarter compared to the same time in 2007, after a 24.3% in January and February combined.
But soaring food costs hurt 300 million people in China estimated by the World Bank to be living in poverty and the central bank said last month that a survey showed 49% of households viewed inflation as ”too high to bear.”
China’s stockmarket fallen 34% this year on concern the government will make monetary policy too tight after interest rates rose six times last year and bank reserve requirements were increased repeatedly to try and restrain lending, especially for property and the stockmarket.
China has imposed price controls on food and energy to try and control inflation: so far without much success.
Producer prices rose 8% in March, after a 6.6% increase in February.
