Over-heating China
Published : November 13, 2003
At first glance, things couldn’t possibly be better in China. GDP growth has accelerated from 5.7 per cent in the April-June quarter to 9.1 per cent in the July-September quarter, and is expected to roar ahead to over 11 per cent in the year’s final quarter.
According to Morgan Stanley, bank lending to the non-financial sector increased by a staggering 50 per cent between the first quarter of 2002 and the third quarter of the current year. Investment in fixed assets in the first three quarters of the current year is up 31.7 per cent.
Imports are growing at 25 per cent, so that trade with China has been a major source of growth for many economies, including India’s. Driven by a combination of foreign investment and massive state spending, the red-hot Chinese economy has been sucking in imports from all over the world, sending commodity prices soaring and lining the pockets of aluminium, steel, iron ore, copper and cotton producers.
Last year, China consumed 21 per cent of the world’s traded aluminium, 24 per cent of its zinc, 28 per cent of its iron ore, 17 per cent of its copper and 23 per cent of its stainless steel. The turnaround in the Indian steel sector owes much to Chinese demand.
The Chinese have been building roads, shopping malls, dams, office blocks, residential complexes and Olympic stadia at a furious pace. Real estate prices in the premium office blocks of Shanghai have doubled in a year.
business-standard.com |
