More worrisome to the powers that be than Tibet ..
business.timesonline.co.uk
From Times Online
April 16, 2008
Fears of unrest as China's growth slackens
Dancers perform a lion dance on the Chinese Lunar New Year
Leo Lewis, Asia Business Correspondent
Astronomic food price surges and a winter of freak snowstorms have taken the edge off China’s roaring economic growth, stoking government fears of embarrassing social unrest before the Beijing Olympics.
Amid rising concerns of recession in the United States, China’s economy expanded at 10.2 per cent over the first three months of 2008 – slipping from the 11.2 per cent growth logged in the previous quarter.
Though still very substantial growth rates, some economists fear that China may have – for the moment – passed a peak in its expansion and its giant exports will suffer as the rest of the world suffers a downturn.
Also of growing concern to investors is also the negative effect of the Olympics on industry – factories in and around Beijing are preparing themselves for long, government-enforced shut-downs in an effort to clear some of the pollution from the city’s smoggy skies.
Related Links
* Fear of rice riots as Far East demand surges
* Gloom reigns but world will not pop
* China's growth could spark political tensions
Others were much more encouraged by today’s figures, believing that the impact of the winter’s abnormally destructive snowstorms, which knocked out power supplies and transport in more than half of China’s 31 provinces, has been under-estimated. Several economists, including Stephen Green of Standard Chartered, said that China’s growth profile still bellowed the need for interest rate increases if the government is to keep growth under a semblance of control.
More alarming for Chinese policymakers, however, is growing evidence that efforts to curb inflation are not working. Consumer prices were 8.3 per cent higher in March than the same time a year ago, placing inflation near a 12-year high and far surpassing the government’s target of 4.8 per cent for 2008. High inflation has, in recent decades, been a trigger for street protests and other unrest.
Adding an extra layer of sensitivity, much of the inflationary pressure now arises from soaring costs of basic foods such as cooking, oil, wheat, pork and other meat. Because food has such a high weighting in China’s consumer price index (38%), the effect of 21 per cent rise in the cost of food since the beginning of the year is very marked.
“When prices are running at a high level, it is a very precarious problem,” said the bureau’s spokesmen, Li Xiaochao, stressing the need to monitor and crack down on illegal behaviour such as food hoarding.
Markets have been watching especially closely for this latest round of data from China: foreign investors are beginning to assume that the country will achieve only 9 per cent economic growth over the course of this year, and that unchecked inflation will create serious hardship throughout China’s still polarised consumer sector.
But Glenn Maguire, the chief Asia economist at SG, said that reports of the death of Chinese growth were much exaggerated. Yesterday’s data from the National Bureau of Statistics contained two huge surprises: fixed asset investment swelled at 25.9 per cent and retail sales grew at 21.5 per cent in March, suggesting that China’s ability to create income is not dependent on its outward-facing industries. The domestic-driven momentum behind consumption in China, he said, is now very strong. |
