The Chinese Government and leadership continue to talk up the quick impact of its $US585 billion stimulus package amid news that the economy slowed again in the March quarter.
China’s Gross Domestic Product rose at an annual rate of 6.1% in the three months, down on the annual 6.8% rate in the December quarter, figures released in Beijing yesterday show.
That was the slowest rise in a decade and was 4.5 percentage points down on the first quarter of 2008 (10.6%) when the figures were cut by severe snowstorms, bad weather and associated production and power shortages and outages.
The figure is under the 9% growth rate in 2008 and 12.9% in 2007. Western groups like the OECD and World Bank are forecasting China will grow by around 6.3-6.5% this year; the Government’s official target is 8%.
China doesn’t issue quarter on quarter growth figures, but the fact that March’s figure was lower than December’s which was lower than September’s indicates that growth has risen slightly, thanks probably to the emergence of the spending splurge in March.
A host of already released figures for the first two months of this year (conflated because of the different timing of the New Year in January of this year) shows sluggish levels of activity (exports were lower, industrial production barely positive at annual rates).
But the figures for March show an improvement in export volumes (but not in imports which fell again, despite higher imports of raw materials such as iron ore) production, spending on real estate and railways.
But there were signs of stronger growth in March as the stimulus package kicks in and in a comment a spokesman for the country’s Statistics Bureau said
"In early 2009, all regions and departments effectively implemented the policies and measures set by the central government on further stimulating domestic demand, promoting the sound and fast growth of national economy, and responded with tenacious spirit to the impacts from the international financial crisis, the overall national economy showed positive changes with better performance than expected."
"In the first quarter of this year, the total value added of the industrial enterprises above designated size was up 5.1 percent year-on-year, or 11.3 percentage points lower than that in the first quarter of 2008, but March witnessed increased growth with 8.3 percent compared with 3.8 percent in the first two months of this year.
"The total value of imports and exports for the first quarter was US$ 428.7 billion, down by 24.9 percent year-on-year. The value of exports was US$ 245.5 billion, down by 19.7 percent, and the value of imports was US$ 183.2 billion, down 30.9 percent.
"The trade surplus was US$ 62.3 billion, an increase of US$ 20.9 billion over the same period last year. In the first quarter of this year, the total value of foreign direct investment actually utilized was US$ 21.8 billion, a year-on-year decrease of US$ 5.6 billion."
The report showed unemployment fell in urban areas in the quarter and more people had trouble finding jobs.
As well companies of all sizes experienced falling profits in the quarter, with a 37% fall being registered in the first two months of the year.
The news comes at the end of a week of data releases that showed signs the stimulus package working, with a surge in bank lending in March, but a drop in inflation and a fall in foreign investment for the six month in a row.
As well exports fell by 17%, better than the 25% fall in January-February (lumped together this year), but the fall in imports deepened to just over 25% in March, from around a fall of 24% in the first two months of the year.
But the imports fall was lessened by steady stockpiling of copper, iron ore and several other commodities by the Chinese Government and processors, such as steel mills in march and preceding months.
Macquarie Securities said this week that a key factor to watch in China will be whether the stimulus policies can reflate the depressed property market in China and kick-start construction activity in the real economy.
The report shows spending on real estate was up 4.1% in the quarter after being up 1% in January and February.
That’s far less than the double digit increases a year ago.
The surge in bank lending, which so far seems to be the major part of the stimulus, has seen bank lending rocket to 4.85 billion Yuan in March, that’s almost all the 5 billion of lending forecast by the government for all of 2009.
Western commentators have largely taken that to be a positive, but then the country’s central bank issued a statement that had both good and bad connotations.
It said it would maintain liquidity in the economy, and planned to “strictly control” credit to some sectors of the economy after the country recorded the record surge in bank loans and money supply in March.
The phrase "strictly control" was taken to mean official concern at the rapid rise in lending, much of it rumoured to have helped the Chinese stockmarket rise by 38% so far this year.
The central bank also identified the need to “give more support to the agricultural sector, small and medium enterprises and other weak links” and “concretely resolve some financing difficulties faced by companies.”
But it also “wanted to “strictly control lending to high-polluting, high-energy consuming industries and to those with overcapacity”.
Fixed asset investment, which accounted for more than 42% of Chinese GDP last year, showed a marked acceleration in March, rising 28.8% over the three months, 4 percentage points above the growth in the same period last year.
Most of the rise came from the surge in bank lending to government-supported infrastructure projects, which offset sluggish levels of inv
