Uncertainties still weigh on China’s economy
China has vowed to maintain its macroeconomic policy stance in 2010 despite worries that its stimulus is likely to risk fueling new bubbles and overcapacity.
A meeting of the Political Bureau of the Communist Party of China (CPC) Central Committee agreed Friday that the country will continue the proactive fiscal policy and moderately easy monetary policy next year.
“It is a must for the country to stick to the pro-growth policy stance,” said Zhang Liqun, a researcher with the Development Research Center of the State Council, one of China’s top think tanks.
“A guarantee to the 8-percent growth target this year does not mean the national economy has been on an independent and stable developing track,” Zhang said.
Many uncertainties, both at home and abroad, still weighed on China’s economy and it was quite necessary for the government to maintain its policy stance, said Feng Fei, a senior researcher at the Development Research Center of the State Council.
China’s economic growth has approached its pre-crisis level a year after the adoption of the 4-trillion-yuan (585.6 billion) economic stimulus package.
The country’s economy grew 8.9 percent year on year in the third quarter this year, accelerating from 7.9 percent in the second quarter and 6.1 percent in the first quarter. In the third quarter last year, it increased 9 percent year on year.
However, the country’s strategy has raised concern that loose money could inflate prices of stocks and housing, build up unneeded factories and saddle the economy with bad debts.
Although the current stimulus package had side effects, it was not the time for retreat, said Zhuang Jian, a senior economist with the Asian Development Bank.
The government should be aware of the hidden trauma in economic growth and be ready at all time for popping-up problems by improving the policy flexibility, he said.
It was important to enhance the flexibility and focus of macro regulation, considering the inflationary expectations, assets bubble risk and rapidly changing economic situation, Feng said.
The Political Bureau vowed to enhance the focus and flexibility of economic policy in the following year according to new situations. It would also further implement and enrich the economic stimulus package to make the economy grow in a more stable, balanced and sustainable way.
Bureau members agreed the government would maintain continuity and stability in its macroeconomic policies, according to a statement released after the meeting.
The barely-changed wording in the statement of the meeting, convened ahead of the annual Central Economic Work Conference, would set the tone for next year’s economic work, said Wang Tongsan, a senior researcher with the Chinese Academy of Social Sciences.
He noted that the “five highlights” in the statement would be mid- and long-term strategy for economic and social development in China, which would enable the country to grab the opportunity during the crisis.
The country would step up efforts to improve the quality and efficiency of economic growth, to promote the transformation of the economic development pattern and structural adjustments and to promote innovation and reform and opening up to enhance the vigor and momentum of economic growth, the statement said.
It also urged more efforts to improve people’s livelihood and maintain social stability, and to coordinate the domestic and international situation.
Higher threshold for senior insurance executives
China plans to raise the threshold for directors, supervisors and senior management personnel of insurance companies, according to a new rule draft issued by the China Insurance Regulatory Commission yesterday.
Compared with the previous rule, the new rule raises higher requirements for educational levels of senior insurance executives. Executives ranging from headquarter chairperson to assistant general manager of a branch are all required to hold a bachelor’s degree or above.
The new rule draft also lists detailed work experience requirements. Insurance company chairpersons must have five years of work experience in finance or 10 years of experience in economy-related work, compared with the previous requirement of eight years.
Directors and supervisors must have …
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SH sees further recovery in foreign trade
China’s economic hub Shanghai in December posted the first year-on-year growth in both imports and exports in 14 months, indicating further recovery from the economic downturn, local customs said Sunday.
Last month, Shanghai’s foreign trade stood at 30.7 billion U.S. dollars, a growth of 35.3 percent over the same month of 2008. This was the second year-on-year growth of foreign trade in two consecutive months in the city, the sources said.
Exports in particular, which stood at 15.21 billion U.S. dollars, reported the first year-on-year growth of 23.5 percent since November 2008, while imports surged 49.5 percent, up from the 26.7 percent growth rate in the previous month.
Last month saw the city’s trade with the European Union, the United States and Japan up 15.4 percent, 36.8 percent and 19.8 percent, respectively.
However, Shanghai’s foreign trade in total last year went down 13.8 percent from 2008 to 277.73 billion U.S. dollars due to the economic crisis effect. The total included 141.91 billion dollars in exports, down 16.2 percent, and 135.82 billion dollars in imports, down 11.1 percent.
Time to cage inflation tiger, say experts
Visitors at the 2009 Shanghai Auto Show. The government’s $586 billion stimulus package and a series of industry-friendly policies have helped revive the country’s economy amid the global financial crisis. [China Daily]
Economy chugs along at good pace, but some red lights ahead
Even as China is set to achieve its targeted goal of 8 percent growth in gross domestic product (GDP) for 2009, economists have stressed that tackling high inflation should be the top priority for policymakers this year.
Inflation is likely to accelerate to more than 5 percent before the middle of this year and reach 8 percent in the second half, Erwin Sanft, head of mainland and Hong Kong equities research at BNP Paribas, was quoted by Bloomberg as saying yesterday.
China’s GDP will surpass the 8 percent year-on-year growth in 2009 and continue to surge in 2010, Yao Jingyuan, chief economist of National Bureau of Statistics, said on Sunday. That confirms the consensus forecast by economists, although none of them are willing to estimate the actual growth figures.
The statistics bureau is scheduled to release the economic data for 2009 on Thursday, but the growth trend has become entrenched since the third quarter of 2009, when GDP expanded by an impressive 8.9 percent year-on-year.
“There are no doubts about robust economic growth this year,” said Zhou Qiren, an economics professor at Peking University. Consumption and exports will continue to strengthen as the global economy gets back to near-normal growth, he said.
The country initiated a massive $586 billion stimulus package in late 2008 and launched a series of industry-friendly policies along with a loose monetary policy to pump prime the economy during the global financial crisis.
The strong surge in new bank lending, however, may have sowed seeds for inflation and other problems, such as asset bubbles. China’s new bank lending in 2009 nearly doubled to 9.59 trillion yuan ($1.40 trillion) over the previous year.
BNP Paribas said China’s inflation rate could touch 8 percent this year. That forecast exceeds most other estimates. Most Chinese economists feel that China would be able to rein in inflation to below 4 percent on average this year.
Li Yining, a senior economist at Peking University, said if inflation soars above 4 percent, the authorities would have to impose tighter measures to stem the growth. “It should be the warning line,” he said.
China’s central bank last week unexpectedly raised the proportion of deposits that commercial lenders must set aside as the country’s credit boom threatens to worsen inflation, which rose by 0.6 percent in November, the first year-on-year growth since last January.
The consumer price index (CPI), the main gauge of inflation, may rise 1.4 percent in December, according to economists surveyed by Bloomberg, intensifying worries that high inflation is coming back as the economy picks up.
Apart from raising banks’ reserve requirement ratio, the People’s Bank of China, the central bank, raised the three-month central bank bill issuing rate for the first time since August 2009 on Jan 7. Analysts see this as a prelude to a series of tightening monetary policies, including interest rate hikes.
“The central bank is likely to increase interest rates twice by 27 basis points this year after April,” said Dong Xian’an, chief macroeconomics analyst with Industrial Securities.
“Gone are the days when we can have economies with high growth rates and inflation as low as 2-3 percent,” he said.
China’s economy hits annual target, but concerns linger
China’s economy resumed double-digit growth in the fourth quarter last year, pushing the annual figure beyond the government target of 8 percent.
Graphics shows that China’s GDP expands 8.7 pct in 2009, according to Ma Jiantang, director of the National Bureau of Statistics (NBS), on a press conference on Jan. 21, 2010. (Xinhua/Zhang Liyun)
But economists warned rising fears of inflation and the risk of market bubbles posed a challenge to a sustained recovery.
The gross domestic product grew 8.7 percent in 2009 after it quickened to 10.7 percent in the last quarter, the National Bureau of Statistics (NBS) announced Thursday.
“China has become the first to revive from the world economic downturn with a typical V-shape recovery,” said Ma Jiantang, NBS director, at a press conference.
He attributed the growth to the government’s timely stimulus package, as well as the proactive fiscal policy and moderately easy monetary policy.
The Shanghai stock market reacted to the figures with caution, adding 0.22 percent to close at 3,158.86 on Thursday.
To fight off the worst global recession in 80 years, China’s government implemented the 4-trillion-yuan stimulus package with hefty spending on infrastructure expansion, such as roads and railways, to counter the 16-percent fall in exports as the downturn sapped demand for Chinese goods.
The nation’s commercial lenders pumped out 9.59 trillion yuan (1.4 trillion U.S. dollars) in credit, almost double that of the previous year.
The promising economic climate saw the Shanghai stock market rise by 80 percent in 2009.
“The double-digit growth followed a rebound of exports and robust industrial output growth in December. A low comparison base also contributed to it,” said Zhuang Jian, an economist with the Asia Development Bank.
Value-added industrial output gained 11 percent in 2009 after shooting up 18.5 percent last month. Urban fixed-asset investment climbed 30.5 percent in 2009 over the previous year.
Retail sales rose 16.9 percent in 2009 after adjusting price changes. December saw an increase of 17.5 percent.
The brisk consumption was partly buoyed by 13 million auto sales last year, putting China ahead of the United States as the world’s largest auto market on the back of government subsidies and tax incentives.
The NBS also revised the first quarter GDP growth from 6.1 percent to 6.2 percent. The third quarter data was raised from 8.9 percent to 9.1 percent.
Ma gave no breakdown of the GDP figures, but promised to release figures at the end of the month after verification. He added the economy would maintain steady and relatively fast economic development in 2010.
After China overtook Germany as the world’s largest exporter at the end of last year, exports would resume their positive role in GDP growth this year, along with investment and consumption, Ma said.
Although China’s economic recovery was taking more hold strongly, Ma said uncertainties remained in China’s economic development since the global recovery was not solidly grounded.
The NBS reported the nation’s consumer price inflation added 1.9 percent in December, the second monthly rise after ending nine months of decline in November. The inflation at factory gate level also ended a 10-month fall last month with a rise of 1.7 percent.
Ma said the rising figures were also a warning that close attention should be paid to price changes and asset bubbles.
“We should stick to the economic policy and better handle the relationship between maintaining growth, adjusting economic structure and handling inflation concerns to prevent fast price rises,” he said.
Runaway credit figures have stoked fears that loans have been funneled into the property and stock markets, inflating asset bubbles.
Housing prices soared 24 percent to 4,695 per square meter last year, the highest in 15 years.
To prevent excess liquidity and inflation, the central bank is slowly putting the brakes on credit growth.
The central bank has allowed one-year bill yields to rise more than expected and asked commercial lenders to keep more money in reserve.
“Although the outlook for consumer price inflation in 2010 is relatively mild in comparison to the inflationary surge in 2007 and 2008, unexpected spikes in food prices and commodity import bills pose risks that could alter this scenario,” said Jing Ulrich, chairman of China equities and commodities of JP Morgan Chase.
Ulrich said inflation was unlikely to materialize in 2010 as the overall domestic demand was not high enough to ignite it.
Industrial overcapacity should limit the ability of manufacturers to pass increased raw materials costs on to consumers, she said in an e-mail.
Xiong Peng, an analyst with the Bank of Communications, forecast any interest rate rise would “not be realized until the second quarter.”
But the central bank would adjust the reserve requirement ratio more frequently in the first quarter to balance monetary expansion, he said.
The authorities were more confident about the domestic economic picture than they were a year ago and were scaling back some of the more aggressive stimulus measures that had been introduced, Ulrich said.
“But there are still risks to the recovery, and therefore the exit strategy should be very gradual,” Ulrich said.
Ma restated China’s persistence in pushing forward economic restructuring, stressing the need to improve the quality and efficiency of growth.
The sole pursuit of growth rate was not desirable, he said.
China’s total gross domestic output was 33.5 trillion yuan in 2009, closing the gap on Japan, the second-largest economy after the United States.
However, China was still a developing nation with 150 million people living below the international property line of 1 U.S. dollar a day.
“We should keep a sober mind on that,” he said.
Experts call for revisions of rising CPI
A saleswoman adjusts price tags at a local supermarket in Guangzhou, capital of south China’s Guangdong Province, Jan. 21, 2010. According to National Bureau of Statistics, China’s consumer price index (CPI), a main gauge of inflation, rose 1.9 percent year on year in December last year, and fell 0.7 percent for the full year in 2009. (Xinhua/Chen Yehua)
Liu Qi, an advertising firm employee in Beijing for eight years, Thursday spent 80 yuan (11.7 U.S. dollars) at a supermarket. About a half went on food and the rest on daily necessities.
However, the biggest financial pressure for the 29-year-old is not food, but her plan to buy an apartment in the city as home prices had risen through the roof.
China’s Consumer Price Index (CPI), the main inflation gauge, climbed 1.9 percent year on year in December, mainly boosted by food, rent and related prices, Ma Jiantang, director of the National Bureau of Statistics (NBS), said Thursday.
The CPI in November and December was lifted by rising consumption on the back of faster economic expansion, and food price hikes caused by winter weather, said Xiong Peng, a senior researcher with Shanghai-based Bank of Communications (BOC), China’s fifth largest lender, Thursday.
A BOC report out Thursday predicted year-on-year CPI growth might stand between 3 percent and 4 percent in 2010.
Customers shop at a local supermarket in Guangzhou, capital of south China’s Guangdong Province, Jan. 21, 2010. According to National Bureau of Statistics, China’s consumer price index (CPI), a main gauge of inflation, rose 1.9 percent year on year in December last year, and fell 0.7 percent for the full year in 2009. (Xinhua/Chen Yehua)
“I have felt vegetable, egg and meat prices rise quickly after heavy storms and temperature drops in Beijing and neighboring provinces. But my food bill is still around 1,200 yuan per month. I don’t have plans to curtail my food shopping list,” Liu said.
Vegetable prices surged 16.4 percent in December from the previous month, Ma said, without specifying figures.
Another 1,300 yuan of Liu’s income went on rent for her bedsit, power, water and maintenancee bills, accounting for more than a fifth of her monthly income.
“I spend about 1,000 yuan to party or dine out with friends, another 500 yuan on clothing and 200 on my cellphone credit each month. Most of my colleagues and classmates have similar situations. I can’t save much. Buying a home is an unrealistic goal for me now, and to rent a bigger apartment is a luxury I can’t afford,” Liu said.
Second-hand home prices jumped about 43 percent near the southern Second Ring Road in Beijing last year where Liu lives, and apartment rents increased about 5 percent on average in this area, said Qin Rui, a senior analyst with Beijing-based 5i5j Real Estate Service.
The government has taken a series of tax, land and monetary measures in recent months to cool the property market, which has soared since February 2009 too much public complaint.
“I heard the inflation ratio was insignificantly bigger in November. I got a slightly bigger paycheck this year, but my income rise lagged behind home price and rental spikes,” Liu said.
China’s CPI fell 0.7 percent year on year in 2009. The CPI was up again in November by 0.6 percent from a year earlier, according to the NBS.
Beijing’s per capita GDP exceeds $10,000
Beijing’s per capita gross domestic product exceeded 10,000 U.S. dollars for the first time last year after a strong economic recovery, a local statistics official said Thursday.
The GDP in the Chinese capital grew 10.1 percent to 1.187 trillion yuan (137.8 billion U.S. dollars) in 2009, according to the Beijing Bureau of Statistics.
The per capita GDP was 68,788 yuan (10,070 U.S. dollars) as the city had 17.55 million permanent residents at the end of 2009.
“The breakthrough is a milestone for Beijing,” said Yu Xiuqin, the bureau’s deputy director. “According to the standards of the World Bank, Beijing has become a moderately well-off city.”
According to the World Bank, a country or region should be recognized as moderately well-off when its per capita GDP exceeds 10,000 U.S. dollars, the official explained.
The service industry contributed to 75 percent of Beijing’s GDP and its urbanization rate had reached 85 percent, she said.
“The Beijing government will take further measures to boost the living standards and social welfare of the rural population to bridge the gap between urban and rural areas,” Yu said.
China’s urban, rural income gap widens
Graphics shows that China’s urban and rural residents’ income increased steadily in 2009, according to Ma Jiantang, director of the National Bureau of Statistics (NBS), on a press conference on Jan. 21, 2010. (Xinhua/Zhang Liyun)
Signs of expansion of the income gap between China’s urban and rural residents emerged Thursday amid the official data showing otherwise strong economic growth.
The per-capita disposable income of urban people was 17,175 yuan (2,514.6 U.S. dollars) in 2009, up 8.8 percent from a year earlier, said Ma Jiantang, director of the National Bureau of Statistics (NBS).
Per-capita disposable income of rural residents stood at 5,153 yuan last year, and the growth rate was 0.6 percentage points lower than that of urban residents.
The income ratio between urban and rural residents was 3.33:1, which meant city dwellers’ average incomes were 3.33 times greater than the average for farmers. In 2008, the ratio was 3.31:1, Ma said.
In comparison, the income ratio was 2.56:1 in 1978 when city dwellers’ average incomes stood at 343 yuan while that of farmers was 134 yuan.
After China introduced the household contract responsibility system to countryside in 1978, rural residents at first saw their incomes grow faster. As a result, the income ratio was reduced to its narrowest at 1.82:1 in 1983, when urban residents’ average incomes were 564 yuan, 254 yuan more than those for farmers.
Official figures showed that the income ratio, a gauge of balanced social development, has been widening since 1985, when the income growth of rural residents slowed as the focus of reform moved to the cities.
A survey last month of 50 leading Chinese economists showed the excessively wide income gap was the major problem that could affect healthy development of China’s economy.
In the survey conducted by the Economy and Nation Weekly magazine, 34 out of the 50 respondents considered the income gap the top threat to China’s future development.
Other problems included weak consumption demand, potential inflation as a result of a credit boom in 2009, lack of a social security network and financing difficulties among small and medium-sized enterprises.
Incomes of rural people working outside their hometowns accounted for 40 percent of their per-capita disposable income, and the sale of agricultural produce 49 percent.
“The government will put more effort into increasing farmers’ incomes, focusing on the two parts,” said Ma.
The government should help improve the skills and abilities of rural workers and moderately raise agricultural produce prices after considering the welfare of both urban consumers and farmers, he said.
China to improve GDP calculation methods
Local officials often inflate figures, causing unreliable data
China could wave goodbye to its GDP data discord as the national statistics bureau chief claims that he will unify provincial and central GDP calculation methods and improve grassroots statistical quality this year.
Ma Jiantang, head of the National Bureau of Statistics (NBS), has criticized some local officials who inflate the GDP figures they report to the NBS. The problem has affected the nation’s statistical credibility and produced disunity between central and provincial data, Ma said.
The aggregate of the GDP figures reported by local governments reportedly is often larger than the overall national figure released by the NBS, arousing concerns that the local governments may have rigged the statistics to show how capable they are of managing local economy.
The new move by NBS is expected to change that, at least partially.
“That’s a positive signal for macro economic analysis,” said Cai Zhizhou, director of National Economic Accounting and Economic Growth Research Center at Peking University. Data accuracy, credibility and cohesion would be improved a lot if the central government can count provincial economic growth indexes directly, he said.
The statistics matter because they have a crucial bearing on the country’s macroeconomic policies, Ma said at the national statistics conference on Jan 28.
According to the bureau, in the first half of 2009, the sum of provincial GDP figures exceeded the national GDP figure, calculated by the bureau independently, by more than 1.4 trillion yuan, or about 10 percent of the total GDP. In 2004, the difference was 3 trillion yuan, or 19.3 percent of the national GDP that year, which was the biggest gap in history.
Ma said that some provinces reported 18 to 20 percent year-on-year GDP growth amid the country’s economic slowdown in 2009. This has raised an alarm for statisticians, because the national GDP growth in that year was only 8.7 percent.
China will release quarter-on-quarter growth data this year, which will help monitor the economy’s short-term growth trend more effectively, Ma said.
“The unification and quarter-on-quarter growth data to be released will lay a foundation for making statistics more transparent, which is crucial for economic analysis and prediction,” said Zhou Mingjian, an analyst with Pacific Securities.
He predicted regional economic growth data would show some declines as the central government begins to enforce the accounting rules, but the national GDP won’t be affected noticeably.
But some analysts warned that if the country pays too much attention to GDP growth and continues to judge local officials’ performance on local GDP growth, the problem of statistical inaccuracy would remain difficult to solve.
China’s consumer inflation up 1.9% in Dec
China’s consumer price index (CPI), a main gauge of inflation, rose 1.9 percent year-on-year in December last year, the National Bureau of Statistics (NBS) announced Thursday.
It is the second straight monthly growth after the index ended nine months of decline in November.
The full year inflation was down 0.7 percent, NBS said.