The Chinese economy: warm, not hot, with strong demand, but no bubbles, yet.
In fact the rebound in the economy, thanks to the $US585 billion stimulus package, is maturing well, with growth in the third quarter rising to an annual rate of 8.9% (about what was tipped by the markets), from 7.9% for the June quarter and 6.1% for the March three months.
For the first nine months of the year, growth averaged an annual 7.7%, which puts it on track for the 8% target of the Government.
Economists said the momentum of quarter-on-quarter growth had actually slowed from the second quarter’s annualized pace of around 14%-16%, achieved on the back of the initial burst of infrastructure spending from the huge stimulus package.
The figures were posted on the National Statistics Bureau’s website yesterday.
Looking at the figures, it is easy to see how China has helped the Asian region out of the mire faster than the rest of the world.
But even if China grows faster next year, it is hard to see that helping the US and Europe to grow faster.
Japan with its huge manufacturing base is the odd man out in Asia, as figures for September’s exports showed yesterday.
Japanese exports were down 30.7%, compared to an annual rate of 36% in August. In value they eased 0.8% in September from August, but by volume, they were up an e4ncouraging 2%-3% from August.
Imports fell 36.9%, which reflects lower prices and the impact of the higher yen to an extent.
But it also reflects the still very sluggish level of demand in the Japanese economy.
Japanese exports to China were down an annual !4% in September, almost half the near 27% annual fall in August, which is a positive sign for Japan and another sign of the impact China is having on the region.
In contrast Chinese imports were down only 3.5% from a year ago in September.
So China’s 2009 growth is locked in, but now 2010 looks like producing an increase with a Reuters poll forecasting 9% growth through the year.
The State Council indicated a possible change in strategy on Wednesday when it said that China’s policy should focus both on controlling inflationary expectations and securing stable growth, the first time it had mentioned inflation since the crisis began.
"The policy focus of the next few months is to balance the need to maintain stable and relatively fast growth, the need to adjust the economic structure and the need to better manage inflationary expectations.”
The statement has restarted speculation that the government could begin to restrict credit to banks or appreciate the currency in order to limit inflationary pressures
But ING raised its 2010 forecast to 11.0% from 9.8%; Macquarie to 10.3% from 8.9%; and Deutsche Bank to 9.0% from 8.3%.
The official 8% rate will again be a target, and the first half of next year will see much stronger growth figures (and for other major measures) simply because the first six months of this year was so flat, especially the March quarter.
The Asian Development Bank reckons growth this year will be 8.2% and perhaps drift back to 6.4%. That is bound to be revised upwards.
Chinese steel use will be up by well over 14% this year, but the World Steel Association sees that easing to 5% growth from a higher base.
That also seems low given he expected growth rate next year will be close to double that.
The news of the stronger growth came after a series of upgrades in recent weeks, thanks to stronger investment, bank lending, car sales and an improving trade picture.
China’s industrial output rose 12.4 percent in the third quarter this year from a year ago, the National Bureau of Statistics said on Thursday.
The figure increased 8.7% year on year in the first nine months.
In September IP was up almost 14%, which is a comfortable level, above which you start thinking too strong.
Price pressures remain non-existent. Deflation has gone: China’s producer price index (PPI), the major measurement of inflation at the wholesale level, rose 0.6% from August in September, to be down 6.5% year on year in the first three quarters of this year.
Likewise with China’s consumer price index which was up 0.4% in September from August, which left it off 1.1% for the Nine months to September.
The CPI was down 0.8% in the year to September, which reflects the deeper price falls of earlier in the year.
Retail sales in China rose 15.1% year on year in the September quarter, 17.0% in real terms because of the negative price inflation for most of the year.
In the year to September retail sales were up 15.5% (before price adjustments), from 15.4% in the year to August).
Urban fixed asset investment rose 33.3% over the first nine months of the year from the same period of 2008; that was up from the 33.0% rise in the eight months to August.
The Shanghai stockmarket is up 68%, and property sales are up 73% over the first nine months of this year, which again is starting to get into ‘hot’ territory, given the state of the overall economy.
In a statement accompanying the release of the data, the Statistics Bureau (which is in the State Council administrative structure) was more circumspect.
It said the economy is at a "crucial stage" in trying to settle on "stable growth"
The "basis of the economic recovery still needs to be consolidated, and&
