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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: TobagoJack who wrote (48579)	4/15/2004 2:08:48 AM
From: elmatador	Read Replies (1) of 74559

Chinese know that there will be a slam in the brakes and are doing as much deals as they can before government slam on the brakes! China's GDP soars higher-than-expected 9.7% By Financial Times reporters Published: April 15 2004 4:39 \| Last Updated: April 15 2004 4:39 China's gross domestic product grew 9.7 per cent in the first quarter, exceeding consensus estimates and raising further doubts over the effectiveness of Beijing's effort to cool the economy. The National Bureau of Statistics said on Thursday that the country's GDP, which grew 7.9 per cent in the same period last year, had reached Rmb2,710.6bn by the end of March. Fixed-asset investment grew a staggering 43 per cent to Rmb879.9bn while the consumer price index went up by 2.8 per cent, compared with 0.5 per cent in the same period last year. While GDP expanded less than the previous quarter's 9.9 per cent, analysts were forecasting growth of just around 9.2 per cent. The latest data represented a setback to China's attempt to rein in runaway economic growth. Starting last summer, the Beijing government has issued persistent warnings against unrestrained bank loans and overinvestment in some industries. The National Bureau of Statistics in a statement highlighted the large increase in fixed-asset investment as the government's primary concern. "Fixed-asset investment is growing too fast. Efforts to control blind, low-level and over-lapping investment in certain industries and regions have not been effective. The situation is putting pressure on inflation and exacerbating 'bottle-necks' in raw material and energy supplies as well as transportation." New figures have also shown that China's attempts to impose discipline on its banks have failed. Money supply, measured by the M2 measure, was up 19.1 per cent in the first quarter and loan growth rose by an annualised 21 per cent - far higher than the contraction of 13 per cent the central bank is aiming for in 2004. Even wholly-owned state banks such as the Bank of China have failed to do the central bank's bidding. Their loan growth in the first three months was up nearly 10 per cent. The Chinese cabinet on Monday had pledged to pursue further "macro-controls" to prevent the creation of asset "bubbles". On the same day, the central bank tightened monetary policy by increasing the ratio of deposits that financial institutions must keep at the central bank from 7 per cent to 7.5 per cent. The problem of overinvestment resides primarily with ambitious local governments trying to boost their standing by expanding local industrial capacity and spending heavily on infrastructure. The Chinese government has set the GDP growth target for this year at 7 per cent. Last year's growth was 9.1 per cent.

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