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Friday, April 17, 2009

Weak exports hit China’s growth

The New Age

China announced its slowest economic growth in at least a decade on Thursday, but analysts said there were some signs that the worst could be over for the Asian giant.
The world’s third-biggest economy posted growth of 6.1 per cent in the first quarter of the year, down from 6.8 per cent in the final three months of 2008, underlining the impact of the global crisis on the export-dependent nation.
‘The national economy is confronted with the pressure of a slowdown,’ Li Xiaochao, spokesman for the National Bureau of Statistics, told reporters.
‘The foundation is still not solid and we still have a daunting task in the coming period.’
He said problems included a decline in exports, a drop in corporate profits and unemployment.
The figure follows nine per cent growth for all of 2008, reinforcing concerns that China this year will experience its slowest economic expansion in 19 years.
Officials have stressed that China’s economy needs to grow by about 8.0 per cent this year in order to prevent social unrest triggered by widescale unemployment.
Before the global economic crisis struck, China had experienced double-digit growth from 2003 to 2007.
‘The quarterly growth was the slowest in the past 10 years as the global financial crisis continued to affect the world’s fastest-growing economy,’ the official Xinhua news agency reported.
Historical data from Beijing statistical authorities are patchy, but Goldman Sachs said growth in the first quarter was actually the slowest since data began being recorded in 1992.
Nevertheless, Li said there were some reasons for optimism, after China in November launched a four-trillion-yuan (580-billion-dollar) stimulus package to combat the global economic crisis.
‘We have seen some positive changes and the results are better than expected,’ said Li.
Most strikingly, urban fixed asset investments rose 28.6 per cent in the first quarter, while in March alone the increase was 30.3 per cent year-on-year, the bureau said.
And while industrial output expanded by just 5.1 per cent in the first quarter of 2009 from a year earlier, it heated up to 8.3 per cent in March, the government said.
Standard Chartered economist Stephen Green said China’s economy had bottomed out in the first quarter, and that the stimulus package was likely to see at least another two quarters of strong investment growth.
‘It looks like we’ve already started to gain some forward momentum,’ he said.
‘The key is whether the consumer keeps spending and whether the private sector starts to invest.
‘Those are the two key things that we need to happen for this recovery to be sustainable.’
Yu Song, an analyst with Goldman Sachs, also sounded a cautious note of optimism.
‘The policy stimulus effects have come even earlier and stronger than we previously expected,’ Yu said in a research note.
Despite the signs of a pickup, worldwide economic woes have left China facing deflation, just a year after it was concerned inflation might be too high.
The consumer price index (CPI), which measures the cost of living and is China’s main gauge of inflation, fell 0.6 per cent in the first quarter of 2009 from a year earlier, according to the bureau.
In March the CPI was down 1.2 per cent from a year ago. Compared with February it fell 0.3 per cent, the bureau said.
CPI grew 5.9 per cent in 2008 but Peng Wensheng, a Hong Kong-based economist with Barclays Capital, said the turnaround to deflation should not be a major concern.
‘I don’t see any significant threat because the CPI number really reflected falls in commodity prices,’ said Peng. ‘(Although) of course weak demand also played a role.’
The first quarter data had very little impact on China’s stock market, with shares edging down just 0.08 per cent on Thursday.



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