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Data cause debate whether GDP is on the mend
By Wang Yanlin |
May 23, 2009, Saturday
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Print Edition
Print Edition
A MIXED bag of China economic data for April released last week confounded both the bulls and the bears amid a debate over whether the world's third-largest economy has bottomed out.
Exports in April plunged more than forecast, and industrial production growth faltered after a strong showing in March.
On the plus side, retail sales growth beat expectations and urban fixed-asset investment in the month exceeded the first-quarter pace.
"We reiterate our view that the recovery will continue," said Peng Ken, an economist with Citigroup who noted that recoveries rarely occur in straight lines.
"Even if the current phase lasts longer than expected," he said, "we believe the authorities have the resources and will to implement stimulative measures."
The April data, coming after some encouraging first-quarter numbers, were eagerly watched by economists who thought they might give a more definitive sign of a turning point in the Chinese economy.
Gross domestic product figures showed a 6.1 percent expansion in the first three months of the year, the weakest growth since at least 1992 but ahead of market expectations.
A rebound in exports and consumer spending are seen as keys to China's recovery.
Exports in April slumped 22.6 percent, exceeding forecasts of a 15 percent drop. The figures disappointed after the pace of the export slump eased in March to 17.1 percent following a 25.7 percent dive in February.
Equally downbeat was industrial production growth in April, which slowed to 7.3 percent after an 8.3 percent gain in March.
China's exports rely on growth in consumer demand in key markets such as the United States and Europe, where the outlook stays dismal.
The European Union, China's largest trading partner, posted a 2.5 percent drop in first-quarter GDP, with Germany's 3.8 percent decline the worst in almost 20 years.
The US, China's second-largest trading partner, still suffers from weak consumer spending after the loss of 6 million jobs last year and a continuing slump in home values.
Zhu Min, executive assistant president of Bank of China, said the global recession may not be close to its bottom and the negative market sentiment, especially on consumer confidence, will take longer to dissipate.
Li Maoyu, an analyst at Changjiang Securities Co, said the export data may show further volatility because demand in emerging markets is also showing signs of decline caused by the spreading recession and rising protectionism.
China's immediate hope may be within its own boundaries. Many economists said they expect the government's 4 trillion yuan (US$586 billion) stimulus package to spur domestic consumption and help offset the decline in exports.
"The rebound in economic activity is heavily dependent on domestic demand on the back of the fiscal stimulus initiatives," said Morgan Stanley economist Wang Qing.
Indeed, China's retail sales jumped 14.8 percent in April, beating forecasts, after a 14.7 percent gain in March. Consumer consumption was powered by spending on vehicles and construction and interior decorating materials. Declining prices also enticed consumers.
"China still has the potential to expand its domestic spending, given that the government is trying hard to spur activity in the vast rural market," said Li at Changjiang Securities. "Rising investment, on the other hand, can help to increase jobs and raise salaries, making people more confident to consume."
China's urban fixed-asset investment jumped 30.5 percent from January to April, rising from the 28.6 percent climb in the first quarter.
"We expect that the strong growth in fixed-asset investment will serve as a boost to the economy and production later," said Peng at Citigroup.
"We expect monetary policy to remain adequately loose and supportive of growth until a true recovery is under way, which we expect to materialize by mid-2009."
Exports in April plunged more than forecast, and industrial production growth faltered after a strong showing in March.
On the plus side, retail sales growth beat expectations and urban fixed-asset investment in the month exceeded the first-quarter pace.
"We reiterate our view that the recovery will continue," said Peng Ken, an economist with Citigroup who noted that recoveries rarely occur in straight lines.
"Even if the current phase lasts longer than expected," he said, "we believe the authorities have the resources and will to implement stimulative measures."
The April data, coming after some encouraging first-quarter numbers, were eagerly watched by economists who thought they might give a more definitive sign of a turning point in the Chinese economy.
Gross domestic product figures showed a 6.1 percent expansion in the first three months of the year, the weakest growth since at least 1992 but ahead of market expectations.
A rebound in exports and consumer spending are seen as keys to China's recovery.
Exports in April slumped 22.6 percent, exceeding forecasts of a 15 percent drop. The figures disappointed after the pace of the export slump eased in March to 17.1 percent following a 25.7 percent dive in February.
Equally downbeat was industrial production growth in April, which slowed to 7.3 percent after an 8.3 percent gain in March.
China's exports rely on growth in consumer demand in key markets such as the United States and Europe, where the outlook stays dismal.
The European Union, China's largest trading partner, posted a 2.5 percent drop in first-quarter GDP, with Germany's 3.8 percent decline the worst in almost 20 years.
The US, China's second-largest trading partner, still suffers from weak consumer spending after the loss of 6 million jobs last year and a continuing slump in home values.
Zhu Min, executive assistant president of Bank of China, said the global recession may not be close to its bottom and the negative market sentiment, especially on consumer confidence, will take longer to dissipate.
Li Maoyu, an analyst at Changjiang Securities Co, said the export data may show further volatility because demand in emerging markets is also showing signs of decline caused by the spreading recession and rising protectionism.
China's immediate hope may be within its own boundaries. Many economists said they expect the government's 4 trillion yuan (US$586 billion) stimulus package to spur domestic consumption and help offset the decline in exports.
"The rebound in economic activity is heavily dependent on domestic demand on the back of the fiscal stimulus initiatives," said Morgan Stanley economist Wang Qing.
Indeed, China's retail sales jumped 14.8 percent in April, beating forecasts, after a 14.7 percent gain in March. Consumer consumption was powered by spending on vehicles and construction and interior decorating materials. Declining prices also enticed consumers.
"China still has the potential to expand its domestic spending, given that the government is trying hard to spur activity in the vast rural market," said Li at Changjiang Securities. "Rising investment, on the other hand, can help to increase jobs and raise salaries, making people more confident to consume."
China's urban fixed-asset investment jumped 30.5 percent from January to April, rising from the 28.6 percent climb in the first quarter.
"We expect that the strong growth in fixed-asset investment will serve as a boost to the economy and production later," said Peng at Citigroup.
"We expect monetary policy to remain adequately loose and supportive of growth until a true recovery is under way, which we expect to materialize by mid-2009."
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