The head of China’s central bank says the country’s economy is on the mend and believes the government 2009 growth target of 8% will be met.
But it will have to come from the $US5875 billion stimulus because the country’s export sector isn’t doing well and exports will have to grow at an impossible rate over the remaining seven months of the year to meet the target for 8% growth in shipments to overseas destinations.
Exports were down 26% in May on May 2008 and off 22% over the first five months of the year.
But there seems to be official confidence that export growth will recover, even though there is no sign of any great upswing in demand from big economies like the US and Europe.
The country seems to have decided to stop stockpiling key resources, such as iron ore, copper, coal; lead, zinc and a host of other products.
A Chinese official told state-run Caijing magazine that the government has halted its metal-stockpiling program, as the policy has achieved its aims of raising market confidence, reducing stocks and stabilizing prices.
The Caijing report cited the published comments by Yu Dongming, chief of the metallurgical division in the National Development and Reform Commission’s industry department, who added that China has so far amassed 590,000 tonnes of aluminum, 159,000 tonnes of zinc, and 235,000 tonnes of copper.
If it continues for long, it will help drive down prices which have been supported by this steady buying since early this year.
The decision to stop the policy of strategic stockpiling seems to be linked to the iron ore brawl between Rio Tinto, BHP Billiton and Chinese steel mills over 2009-10 iron ore prices.
The official benchmark price has been abandoned and Rio Tinto has threatened to sell all its product into the spot market (Both it and BHP have been selling 50% and more of their iron ore production into the spot market since January).
The move to stop stockpiling will have another impact on China not readily appreciated: it could very well show that imports have fallen much more sharply than the 25% slump in May: import figures have been bolstered by this strategic buying of commodities this year, even as prices have fallen for products like iron ore and coal.
That could show that China’s trade performance is worse than we believe.
That is already the source of high level Chinese Government speculation.
Two less senior officials have expressed doubt the export targets would be met, but yesterday Zhou Xiaochuan, governor of the People’s Bank of China, said signs the downturn in the world’s third-largest economy was levelling off began to emerge in March.
The Chinese economy grew at an annual 6.1% rate in the March quarter, but to reach the 8% target would require growth to start accelerating this quarter to the 8% mark and beyond.
Chinese banks continue to end at near record levels as the Government spends its stimulus money.
Figures out at the weekend from the Government said that half of the central government funds of 1.18 trillion yuan ($US172.6 billion) promised under last year’s economic stimulus package had been allocated through June.
The Ministry of Finance (MOF) said on its website Friday said that 591.5 billion yuan had been allocated, of which 21.2% would go to rural infrastructure, 11.9% to medical care, education, public welfare and culture projects and 33.8% would help rebuild areas hit by last year’s massive earthquake.
In the 4 trillion yuan stimulus package announced last November, 1.18 trillion yuan, or 29% would come from the central government. The remainder was to be supplied by local governments and the private sector.
The MOF said the central government would allocate 588.5 billion yuan next year.
But you have to question these figures after again Bloomberg reported that Chinese banks are lending heavily for stockmarket investment.
Bloomberg said a magazine called Chinese Business News claimed that new bank loans worth about an estimated 1.16 trillion yuan ($US170 billion) were invested in the stock market in the first five months of this year.
"That’s 20 percent of the 5.8 trillion yuan loans banks extended in the period, the Shanghai-based newspaper said, citing Wei Jianing, a deputy director at the macro-economics department of the Development and Research Center under China’s State Council," Bloomberg reported.
That could help explain how the Chinese stockmarkets have outperformed the rest of the world, hitting year highs on the last four trading days, to be up 61% so far in 2009. That was after falling 65% in 2008.
Meanwhile figures out yesterday show that Japanese unemployment continues to worsen.
The country’s unemployment rate hit its highest level in more than five years in May, at 5.2%, up from 5% in April.
The May jobless rate matched the 5.2% in September 2003.
That is still under the post-World War II high of 5.5% per cent, which was last seen in April 2003.
Other figures there are more than two people unemployed for every vacant job in May.
