The western economies are being softened up for news on China’s first half growth which is due out next week, along with other important figures such as trade and inflation.
But growth is the key: it was 6.1% annualised for the March quarter, now official spokesman are saying it could hit 7.5% in the second quarter and be headed higher over the year.
Bloomberg reported that growth may have accelerated to as much as 7.5% on surging fixed-asset investment and loans, according to Zhang Jianhua, head of research bureau of China’s central Bank, The People’s Bank of China. (Which makes him quite senior).
“Despite a global economic contraction and some uncertainties over growth in domestic demand, China’s economic recovery will continue,” Zhang said.
Bloomberg said his comments were in an edition of the central bank’s China Finance magazine, published this month.
And growth may expand 8% in the third quarter and 9% in the December quarter, he wrote.
President Hu Jintao said in Rome that the economy “has stabilized.”
Ten days ago, China’s Central Bank Governor Zhou Xiaochuan indicated that second quarter growth would be up on that in the March quarter
The "prevailing prediction is that the second quarter is a little bit better than the first quarter”, he told reporters at the Bank for International Settlements annual meeting in Basel on June 28.
And an economist in China’s National Bureau of Statistics said earlier in June that he expected growth to rebound strongly to nearly 8 per cent in the second quarter.
China’s GDP grew 13% in 2007 and 9% in 2008 and the 6.1% annual rate in the first quarter of this was the lowest for two decades.
Mr Zhang said in the article he sees annual expansions of about 8% from 2010 as the global economy grows at a weaker pace than before the financial crisis, curtailing export demand.
Overcapacity in Chinese industries may also limit investment.
Policy makers don’t need to make ‘drastic” adjustments to monetary policy, Zhang said, adding that some “fine-tuning” is necessary to prevent asset bubbles, bad-loan risks and a return to high inflation.
But China may face a greater inflationary risk in the first half of next year, Zhang said.
And private forecasters have started falling into line with Bloomberg reporting that BNP Paribas issued a report yesterday saying that China’s economic growth in 2009 will top the government’s 8% target because of the strengthening investment, household demand and stabilizing demand for exports.
BNP said growth will rise by 8.2%, up from a previous 7.7%; growth in 2010 will be 9.5%, up from an 8.5%.
The World Bank last month lifted its forecast for China to 7.2% annual from 6.5%, so the private forecasts are now running well ahead of that.
Goldman Sachs and Morgan Stanley have raised forecasts for China in the past month because they see the $US585 billion stimulus plan boosting domestic activity.
The local stockmarket believes the bullish outlook: it’s up 72% this year so far.
But the performance of the export sector remains the key for sustained growth.
Too much domestic growth will set off inflation and prove unsustainable if there’s no pick up in international demand and trade.
Once again keep an eye on the imports figure in next week’s trade stats from China.
If its down by 20% or more in June, it will confirm that the domestic economy is running on a high wire.
