Related News
A time of challenge and opportunity
By Wang Yanlin |
January 5, 2009, Monday
|
Print Edition
Print Edition
LAST year marked a turnaround for China's economy, while this year may also prove to be a period of turbulence. However, economists say the situation is not all bad for the world's fourth-largest economy.
China has showed less symptoms of the global financial meltdown than many richer nations. Many have looked to China to play the role of stabilizer and calm more troubled economies. However, China is by no means totally immune to the global slowdown.
During the past few months, China has reported fewer exports and imports, weaker industrial output, shrinking profits in the manufacturing sector and slumping foreign direct investment.
The country's gross domestic product grew 9 percent in the third quarter of last year, the slowest in the past five years and down significantly from a jump of 11.9 percent in 2007.
November's exports showed the first drop in seven years - 2.2 percent - which was the largest fall since April 1999. November's imports fell a more drastic 17.9 percent, as factories bought less raw materials from overseas.
Manufacturers' profits rose only 4.9 percent in the first 11 months of last year, far weaker than the increase of 36.7 percent during the same period of 2007, while foreign direct investment fell 36.5 percent in November, after investors from other countries kept their funds at home to guard against possible risks.
The discouraging data triggered market concerns and many economists lowered their forecasts for China's growth of this year.
"The economy has been more volatile than we initially anticipated," said Wang Qing, a Morgan Stanley economist. "The course of policy action has been broadly in line with our calls. Policy responses in the last few months were more aggressive than we originally envisaged but appear warranted, given the rapid deterioration in economic fundamentals."
China shifted from a tight to a more relaxed fiscal policy and a moderately loose monetary policy in the second half of last year in an attempt to boost the slowing economy.
As part of this policy shift, China unveiled a 4-trillion-yuan (US$586 billion) fiscal package in November. The money will be spent over the next two years on the construction of infrastructure such as roads, railways and airports, on the improvement of living standards in rural areas and on supporting small businesses.
In addition, provincial governments have proposed more than 10 trillion yuan in infrastructure spending, following the central government's efforts to boost domestic demand.
As for monetary policy, China's central bank has lowered the interest rates five times since September and cut the reserve-requirement ratio to boost market liquidity. The benchmark lending rate has been reduced to the lowest level since 2002, only 27 basis points away from its lowest level in three decades.
However, such aggressive moves did not prevent financial institutions lowering their expectations for China.
The World Bank forecast China's GDP would grow 7.5 percent this year down from 9.4 percent last year, more pessimistic than the general projection of about 8 percent.
"The impact of the international financial and economic turmoil on China's economy has been manageable so far, but is expected to intensify," said the bank. "Looking forward, the impact of the crisis is spreading globally, with risk aversion and deleveraging leading to a funding squeeze that affects demand in many countries, including many emerging markets - China's export growth is likely to be low in 2009."
Huang Yiping, an economist with Citigroup, expected the growth of China's GDP to settle at 8.2 percent this year.
"The effects of the global downturn have depressed China's near-term growth outlook," said Huang. "We have revised our growth forecasts downwards, but continue to believe a soft landing is the most likely scenario, as fiscal stimulus over time spurs growth."
Morgan Stanley's Wang said China's growth will make a U-shaped turnaround.
"China's economic outlook for 2009 is best characterized as 'getting worse before it gets better,' laying the foundation for a firmer recovery in 2010," said Wang, who predicted China's growth may stay between 7.5 and 8 percent this year.
"The effect of the stimulus policies, together with a tepid recovery in G3 economies, is expected to help the Chinese economy regain some growth momentum in the second half of (this) year."
No matter what economists say, China has set the target for economic expansion this year above 8 percent, a practical aim but one that requires determination to achieve.
Ma Jiantang, head of the National Bureau of Statistics, recently said China's consumption and investment still had great potential and they can help sustain the country's growth amid the global downturn.
The current situation could even provide a good opportunity for China to improve its economic structure, Ma said. The country may seize the chance to reduce its reliance on exports and spur domestic spending to create a less volatile economy.
In recent months, the government has introduced policies to support the property market and spur consumption. We can expect more as the year progresses. It will be a testing time, but China has the potential to emerge from this downturn with an even stronger economy.
China has showed less symptoms of the global financial meltdown than many richer nations. Many have looked to China to play the role of stabilizer and calm more troubled economies. However, China is by no means totally immune to the global slowdown.
During the past few months, China has reported fewer exports and imports, weaker industrial output, shrinking profits in the manufacturing sector and slumping foreign direct investment.
The country's gross domestic product grew 9 percent in the third quarter of last year, the slowest in the past five years and down significantly from a jump of 11.9 percent in 2007.
November's exports showed the first drop in seven years - 2.2 percent - which was the largest fall since April 1999. November's imports fell a more drastic 17.9 percent, as factories bought less raw materials from overseas.
Manufacturers' profits rose only 4.9 percent in the first 11 months of last year, far weaker than the increase of 36.7 percent during the same period of 2007, while foreign direct investment fell 36.5 percent in November, after investors from other countries kept their funds at home to guard against possible risks.
The discouraging data triggered market concerns and many economists lowered their forecasts for China's growth of this year.
"The economy has been more volatile than we initially anticipated," said Wang Qing, a Morgan Stanley economist. "The course of policy action has been broadly in line with our calls. Policy responses in the last few months were more aggressive than we originally envisaged but appear warranted, given the rapid deterioration in economic fundamentals."
China shifted from a tight to a more relaxed fiscal policy and a moderately loose monetary policy in the second half of last year in an attempt to boost the slowing economy.
As part of this policy shift, China unveiled a 4-trillion-yuan (US$586 billion) fiscal package in November. The money will be spent over the next two years on the construction of infrastructure such as roads, railways and airports, on the improvement of living standards in rural areas and on supporting small businesses.
In addition, provincial governments have proposed more than 10 trillion yuan in infrastructure spending, following the central government's efforts to boost domestic demand.
As for monetary policy, China's central bank has lowered the interest rates five times since September and cut the reserve-requirement ratio to boost market liquidity. The benchmark lending rate has been reduced to the lowest level since 2002, only 27 basis points away from its lowest level in three decades.
However, such aggressive moves did not prevent financial institutions lowering their expectations for China.
The World Bank forecast China's GDP would grow 7.5 percent this year down from 9.4 percent last year, more pessimistic than the general projection of about 8 percent.
"The impact of the international financial and economic turmoil on China's economy has been manageable so far, but is expected to intensify," said the bank. "Looking forward, the impact of the crisis is spreading globally, with risk aversion and deleveraging leading to a funding squeeze that affects demand in many countries, including many emerging markets - China's export growth is likely to be low in 2009."
Huang Yiping, an economist with Citigroup, expected the growth of China's GDP to settle at 8.2 percent this year.
"The effects of the global downturn have depressed China's near-term growth outlook," said Huang. "We have revised our growth forecasts downwards, but continue to believe a soft landing is the most likely scenario, as fiscal stimulus over time spurs growth."
Morgan Stanley's Wang said China's growth will make a U-shaped turnaround.
"China's economic outlook for 2009 is best characterized as 'getting worse before it gets better,' laying the foundation for a firmer recovery in 2010," said Wang, who predicted China's growth may stay between 7.5 and 8 percent this year.
"The effect of the stimulus policies, together with a tepid recovery in G3 economies, is expected to help the Chinese economy regain some growth momentum in the second half of (this) year."
No matter what economists say, China has set the target for economic expansion this year above 8 percent, a practical aim but one that requires determination to achieve.
Ma Jiantang, head of the National Bureau of Statistics, recently said China's consumption and investment still had great potential and they can help sustain the country's growth amid the global downturn.
The current situation could even provide a good opportunity for China to improve its economic structure, Ma said. The country may seize the chance to reduce its reliance on exports and spur domestic spending to create a less volatile economy.
In recent months, the government has introduced policies to support the property market and spur consumption. We can expect more as the year progresses. It will be a testing time, but China has the potential to emerge from this downturn with an even stronger economy.
- About Us
- |
- Terms of Use
- |
-
RSS - |
- Privacy Policy
- |
- Contact Us
- |
- Shanghai Call Center: 962288
- |
- Tip-off hotline: 52920043
- 沪ICP证：沪ICP备05050403号-1
- |
- 互联网新闻信息服务许可证：31120180004
- |
- 网络视听许可证：0909346
- |
- 广播电视节目制作许可证：沪字第354号
- |
- 增值电信业务经营许可证：沪B2-20120012
Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.
