The apparent success of the Chinese government’s stimulus spending has seen the IMF join the World Bank and private forecasters in upping China’s 2009 and 2010 growth forecasts.
In the update of its World Economic Outlook, the Fund said it now expected Chinese growth to grow 7.5% and 8.5% in 2009 and 2010 respectively’ both estimates are one percentage point higher than projected in April’s 2009 Outlook.
The World Bank has lifted its forecast from 6.5% to 7.2%; BNP Paribas sees 2009 growth hitting 8.2% and Goldman Sachs late this week issued its second upgrade for China this year.
The Government has a growth target of 8% for the year.
It said it now sees second quarter growth (due to be released next week) growing at an annualised figure of 7.8%, up from the previous estimate of 7.0% and the official 6.1% annual figure recorded in the first quarter.
Earlier this week it was reported that the head of research at China’s central bank had written that he expected growth to rise as the year goes on and reach around 9% by the final quarter.
He forecast growth of around 8% for 2010, which would come under pressure if there was no pick up in demand elsewhere in the world
(A point the IMF made in its global update about the world economy in 2010)
China’s crude steel output figures for June show a picture that illustrates where the Chinese economy is placed right no: it’s growing, but rather bumpily.
Crude steel out put reached 45.39 million tonnes last month, the official Shanghai Securities News reported yesterday.
That was 2.3% lower than the 46.46 million tonnes produced in may, which was the highest for 11 months.
The annual rate of output implied from the monthly figure was 552.2 million tonnes, more than 10% above 2008’s output of 500 million tonnes.
June’s figure was 1% less than the record 46.94 million tons set June, 2008.
According to figures from the World Steel Association, June’s figure was nearly 10% higher than the 41.19 million tonnes produced in the sluggish month of January this year.
So there’s growth in output, which explains the strong iron ore market and now there’s reports of rising steel prices in China, another good sign.
Media reports say Chinese steel prices have risen 15% for many products since April as the government spending, especially on railways and construction kicks in.
Wuhan Steel reportedly boosted prices 12% for August delivery. This would be the third monthly price rise in a row.
But cars are the stand out performer, which helping demand for steel, and lower- priced Australian iron ore.
Figures out this week showed a 48% jump in China’s passenger-vehicle sales in June, the biggest jump since February 2006.
Sales were up 47% in May, so there’s been a plateauing in the growth rate, which remains incredibly high.
Chinese motorists bought 872,900 cars, sport-utility vehicles and other passenger vehicles last month.
Overall sales, which include buses and trucks, rose 36% to 1.14 million.
China’s first-half vehicle sales rose a more sedate, but still solid 18% to 6.1 million units.
Sales of passenger vehicles rose 26% to 4.53 million, while commercial-vehicle sales fell half a per cent to 1.57 million.
That’s in stark contrast to the 35% first half slump in US vehicle and passenger car sales.
But as solid as the steel and car sales figures, the basis for much of the growth is the Government’s huge stimulus spending, and that in turn is feeding into explosive growth in bank lending.
Figures out this week showed the country’s banks have extended 47% more loans so far this year than the central bank’s minimum target for 2009.
The lending is financing deals (the smattering of market floats), much of the near 70% rise in the stockmarket and the boom in car sales, investment plans and some property deals where demand is said to be improving, along with prices.
First half lending was a record 7.37 trillion Yuan, more than three times the amount a year earlier and well above the Government limit of 5 trillion Yuan for the full year.
June’s lending was more than double that of May when there was a marked slowing in the hectic rate of growth.
The People’s Bank of China said new Yuan-denominated loans stood at 1.53 trillion Yuan (about $US223.96 billion), more than double the 664.5 billion Yuan in May.
A big rise was expected in June (as there was in March) as banks boost their quarterly lending figures.
The Financial Times Lex column remarked:
"An unknowable amount of this cash has ended up on the blackjack tables of Macao – or that other casino, the Shanghai Stock Exchange, where daily volumes are currently three times the five-year average. But even assuming that most has gone where intended, there are many reasons to worry."
The strong second-quarter output figures are out next Thursday, (in the 60th anniversary year of the founding of the people’s republic).
