No sign of any change in policy from China this week, despite those stockmarket nerves, with strong support for its current economic policy from the head of the World Bank on an official trip..
Senior Chinese officials, including Premier Wen JiaBao also indicated there would be no change in comments reported in meetings with the World Bank’s Robert Zoellick.
Perhaps that helped Chinese sharemarkets rise strongly yesterday, up 4.8% in the biggest rise in six months.
Even though figures out either late next week, or the week after, will confirm the economy is still growing, there’s fears that monetary policy is being tightened.
What seems to be happening is that many investors, inside and outside of the country have confused the way lending decisions are concentrated at the start of the year, and the volume and value of loans drops in the second half.
The Asian Development Bank won’t be confused; it is expected to reveal upgrade forecasts for much of the region when it issues its annual report later this month.
The changes will reflect the better than expected figures from China, South Korea (yesterday), Singapore, Thailand, Japan and Taiwan in the past month.
Australia, though not a member of the region, is also doing better, and the improvement in our exports (up in volume terms in the first half of the year, probably the only country to do that) reflects the improving outlook in the region to the north of us.
But spot iron ore prices are starting to weaken, shipping costs are down: are these hints towards rougher times ahead?
South Korea yesterday reported a strong 2.6% rise in second quarter growth from the March quarter.
While that was better than the earlier estimate of 2.3%, it was still 2.l2% down on the second quarter of 2008.
Like Australia, the Government has launched several major stimulus packages, with building, construction, cars and retail sales all stimulated, along with tax breaks for small and medium businesses.
And, like Australia, the central bank slashed interest rates, quickly; down 3.25% between October and February (4.25% in Australia).
But the country’s Government is continuing to spend because exports remain weak.
It’s reports like this that will see the update from the ADB.
The ADB had originally forecast a 3% rise in growth for the developing East Asia region, but the stronger performance of the Chinese economy in particular has improved prospects in the region.
The ADB’s Asian Economic Monitor published in late July, hinted that growth forecasts for China, Indonesia, and possibly South Korea are more likely to be scaled up when the ADB publishes the refined Outlook on September. 22.
The extent of any revision is not known, and will have to take account for a deeper than expected impact from the slowdown earlier this year., But Japan, Singapore, Taiwan, South Korea, Thailand have all reported better second quarter performances than expected earlier in the year.
China is the cause for much of this improvement and the continuing speculation about its approach to policy in the second half of 2009 has weakened the stockmarket boom and raised questions in the minds of outside analysts about the health of the economy in coming months.
The market is down just over 20%, but that is probably a good thing if it removes a lot of the bubble-like mentality
On Wednesday World Bank President Robert Zoellick said China’s decision to pursue proactive fiscal and moderately easy monetary policies would benefit the economic recovery of both China and the world.
He said China should not change the orientation of its stimulating policies too early as uncertainties still existed for the country’s economic recovery, in comments reported by and displayed prominently on the Xinhua official news website.
Zoellick was quoted as saying; "Through its massive stimulus and strong lending program, China has contributed to the early signs of a global recovery by keeping its growth rate up."
He projected that Chinese economy would grow by nearly 8% this year. The Bank has already raised its official forecast for China’s economic growth to 7.2% in June from an earlier forecast of 6.5%.
Mr Zoellick said that with China’s economic growth close to 8 percent and signs of stabilization in many countries in Asia and around the world, the chances of a truly global recovery have increased measurably.
The day before, Premier Wen Jiabao said Tuesday China would not change the orientation of its stimulating economic policy as the country is at a critical stage in the recovery of the economy.
Wen said (and quoted by Xinhua) that China’s government would continue to pursue proactive fiscal and moderately easy monetary policies.
"We will not change the orientation of our policy," Wen said.
Wen said China would fully implement and continue to enhance and perfect policy in response to the international financial crisis to achieve the goals of economic and social development.
"The macro-economic policy and measures that China adopted in response to the international financial crisis have been proved in conformity with reality, prompt, forceful and effective," Wen said.
Wen said the world economy was now showing signs of stabilizing, but an all-round recovery would be a slow, difficult and complicated process. It would require long-term, concerted efforts by every country in the world in strengthening dialogue, coordinating policy and deepe
