China Industrial Output Rises 8.9%, Slowest in 3 Yrs (Update3)
Feb. 18 (Bloomberg) -- China's production rose in January at the slowest pace in three years after the government clamped down on investment to help cool inflation and ease power shortages.
Output rose 8.9 percent from a year earlier after climbing 14.4 percent in December, the Beijing-based National Bureau of Statistics said today on its Web site. The figures were adjusted to allow for changes in the number of working days caused by the weeklong Lunar New Year holiday falling in different months.
China's exports and consumer spending are surging, taking up the slack in Asia's second-largest economy as industrial expansion is reined in. Economic growth reached an eight-year high of 9.5 percent last year and economists including Ben Simpfendorfer say January's gain in production, which was the smallest since December 2001, is unlikely to herald a slowdown.
``There is no reason to suspect that growth would decelerate to the 9 percent level,'' said Simpfendorfer, an economist at JPMorgan Chase & Co. in Hong Kong. ``There's no other number out there to suggest that growth is slowing.''
Exports jumped 33 percent to a record $63.8 billion in December and retail sales climbed 15 percent, the biggest gain in seven months. On an unadjusted basis, China's industrial production rose 20.9 percent last month to 484 billion yuan ($58 billion), the statistics bureau said.
Boom Economy
The Hang Seng China Enterprises Index, comprising mainland stocks with so-called H shares traded in Hong Kong, fell 0.2 percent to 4899.27 as of 12:02 p.m. local time. The index has rallied almost 40 percent since hitting a seven-month low on May 17, led by gains in commodities companies including Yanzhou Coal Mining Co. and Jiangxi Copper Co.
``Contrary to all the talk on whether there will be a soft landing or a hard landing, I think it's still very much on the upswing,'' said Wilbur Ross, chief executive officer of leveraged buyout firm W.L. Ross & Co. ``It's booming.''
Economists including Robert Subbaraman at Lehman Brothers, Yiping Huang at Citigroup Inc. and Mike Moran at Standard Chartered Bank Plc predict China's central bank will follow up on October's interest rate increase -- the first in almost a decade -- with more hikes this year to help cool the economy.
Subbaraman, who is based in Tokyo, said he expects the bank to raise its benchmark lending rate by 70 basis points this year to 6.28 percent. A basis point is 0.01 percentage point.
Interest Rates
Central Bank Governor Zhou Xiaochuan on Feb. 7 said he's ``comfortable'' with the nation's interest rates, and that the bank will ``consider interest rate policy'' in coming months, without being more specific.
The bank on Jan. 5 lowered its growth target for M2, the broadest measure of the nation's money supply, to 15 percent from 17 percent and expansion in has been kept within this level for the past six months. Inflation probably reached an 11-month low in January, according to the median forecast of eight economists surveyed by Bloomberg News.
Growth in industrial production growth has slowed from about 19 percent since Premier Wen Jiabao in April clamped down on expansion in industries including steel, autos and real estate. Urban investment in factories, roads and other fixed assets rose 21 percent in December, down from 35 percent growth in April.
Economists tend to look at combined figures for the first two months of the year to fully allow for distortions caused by changes in the timing of the Lunar New Year, which fell in February this year and January in 2004.
To contact the reporters for this story:
Philip Lagerkranser in Hong Kong at lagerkranser@bloomberg.net
To contact the editor responsible for this story:
Bruce Grant in Hong Kong at bruceg@bloomberg.net
Last Updated: February 17, 2005 23:15 EST
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