Jay,
Is China peaking?-D
China's GDP Growth Unexpectedly Accelerates to 9.5%
Jan. 25 (Bloomberg) -- China's economic growth unexpectedly accelerated to 9.5 percent in the fourth quarter and the government said it will maintain restrictions on lending and investment in the world's fastest-growing major economy.
The increase in gross domestic product from a year earlier exceeded the median 8.9 percent forecast in a Bloomberg News survey of 10 economists and the 9.1 percent gain for the third quarter. For the whole year, GDP rose 9.5 percent to 13.65 trillion yuan ($1.6 trillion), the National Bureau of Statistics said at a press conference in Beijing.
Growth was driven by exports and improved harvests, while government policies cooled investment and inflation, the bureau said. The economy almost trebled in size in the past decade, helping sustain global growth and driving a 37 percent jump in copper prices and a 34 percent increase in oil costs last year.
``They're going to live with strong growth over the course of this year,'' said CLSA Ltd. Chief Economist Jim Walker, who in November was voted best regional economist in an Asiamoney brokers' survey for an 11th straight year. ``We're expecting inflation in China to take off in the second half and therefore monetary policy to be tightened in the second half.''
Premier Wen Jiabao said on Jan. 22 he has no plans to relax policies designed to cool industrial expansion in an economy that is the world's largest consumer of copper, steel and cement.
``Growth would have been even higher had it not been for the government's control measures and we would be facing serious inflation now,'' Li Deshui, head of the bureau and one of 13 members of the central bank's monetary policy committee, said at the press conference. ``We will enhance and improve macroeconomic controls.''
Inflation, Investment
Consumer prices increased 2.4 percent in December, the smallest gain in 10 months, and industrial production rose at the slowest pace in more than a year, today's report showed. Fixed- asset investment in urban areas increased 21 percent after gaining 25 percent in November.
China's exports jumped 33 percent to a record $63.8 billion in December and retail sales climbed 15 percent, the biggest gain in seven months. Production of corn, wheat and other staple grains rose in 2004 for the first time in five years, helped by a 10 percent increase in the autumn harvest.
JP Morgan Chase & Co. raised its 2005 economic growth forecast for China to 8.5 percent from 8.2 percent after today's report and Lehman Brothers increased its projection to 8.8 percent from 8.3 percent. Lehman forecast the central bank will raise its benchmark one-year lending rate 70 basis points this year to 6.28 percent.
Stocks Surged
Commodity stocks such as Rio Tinto Group and JFE Holdings Inc. rose. Rio Tinto, the world's third-biggest miner, rose 1.3 percent to A$43.25. JFE Holdings, Japan's No. 2 steelmaker, rose 0.7 percent to 2,810 yen. Surging demand from China helped drive a 23 percent increase in the price of zinc and a 37 percent jump in copper prices on the London Metal Exchange last year.
The Hang Seng China Enterprises Index, which tracks 38 mainland companies that have so-called H shares listed in Hong Kong, jumped 1.6 percent to 4617.32 at the 4 p.m. close. PetroChina, China's biggest oil producer, rose 1.8 percent to HK$4.275 and China Mobile (H.K.) Ltd., the world's largest mobile- phone company by users, increased 2.8 percent to HK$24.10.
``The contribution to the strong GDP was from the right areas rather than fixed-asset investment,'' said Agnes Deng, who helps manage $2.5 billion at Standard Life Investments Ltd. In Hong Kong.
Slight Slowdown
China's growth might be ``slightly lower'' this year and inflation should average about 4 percent, up from 3.9 percent in 2004, Li said at today's conference, without providing a growth forecast. China has averaged annual growth of 9.4 percent since its reform and opening policies started in 1978, he said.
The government last year relied heavily on administrative orders to cool investment in industries including steel, autos and aluminum, halting land sales for development and rejecting approvals for new projects.
Hangzhou Iron & Steel Co. said on Dec. 30 it scrapped a plan to raise money on the Shanghai stock exchange because the government rejected part of its expansion and investment plans. Lanzhou Aluminum, China's second-largest publicly-traded aluminum producer, on the same day said it abandoned plans to build an industrial park in the northwestern city of Lanzhou because of tighter controls governing land use.
`Soft Landing'
``Demand has slowed down, but it's very sector specific,'' James McIlvenny, China president of The Dow Chemical Co., the largest U.S. chemical maker, said in Shanghai. ``It appears we are heading to a nice soft landing which we think is good for us in the future. We would like to see stable growth rather than cycles of fast growth and little growth.''
This year, the government has said it will rely more on market-based measures including interest rates, to control the pace of investment and growth. The central bank increased rates for the first time in a decade on Oct. 29. and Governor Zhou Xiaochuan on Jan. 20 said the yuan's decade-old peg to the U.S. dollar will gradually be relaxed. He didn't give a timeframe.
The U.S., which had a record $124 billion trade deficit with China in 2003, says the peg of about 8.3 per dollar keeps the currency's value artificially low, giving Chinese manufacturers an unfair advantage by making their goods cheaper abroad. The link, which enabled the yuan to track the dollar's 7.1 percent slide against the euro last year, may be discussed when China attends next month's meeting of finance ministers and central bankers from the Group of Seven nations in London.
Surging Incomes
As investment is reined in, particularly that by state- controlled companies, the government is turning to exports, the private sector and household spending to keep the economy growing fast enough to create tens of millions of jobs for graduates, surplus farm workers and fired state workers.
Per capita disposable incomes in urban areas, home to a third of the nation's 1.3 billion people, rose 7.7 percent in real terms to 9,422 yuan last year. Net incomes in rural areas, which were boosted by increased grain production and higher food prices, climbed 6.8 percent to 2,936 yuan per person. Incomes haven't risen faster since 1997, the statistics bureau said.
``If you look at household income, as opposed to individuals, by 2020, there will be 100 million households with disposable incomes equivalent to western Europe today,'' said Yuwa Hedrick-Wong, economic adviser to MasterCard International Inc., the world's second-biggest credit-card network by number of cards.``That's how powerful the demand side driver is.''
China's retail sales rose 13 percent last year to 5.4 trillion yuan, exceeding the GDP of the Netherlands, Europe's sixth-largest economy. The nation's urban jobless rate was 4.2 percent at the end of last year, down from 4.3 percent a year earlier, the statistics bureau reported today.
To contact the reporter for this story:
Nerys Avery in Beijing at navery1@bloomberg.net
To contact the editor on this story:
Christopher Wellisz at cwellisz@bloomberg.net
Last Updated: January 25, 2005 05:47 EST |
