Economists see signs of growing recovery
By Wang Yanlin |
September 5, 2009, Saturday
|
Print Edition
Print Edition
NEW signs of a recovering Chinese economy should be evident when additional August financial data are released next week, analysts said yesterday.
Narrower declines in trade and smaller drops in prices are forecast.
And although the pace of new yuan lending may moderate significantly to curb asset bubbles, the tightening credit trend should not threaten economic recovery, experts said. It could, however, affect market sentiment.
"The market's current focus is on the monthly loan numbers, based on the common view that credit growth is the main force behind equity prices. But this assumption is not quite right. Liquidity has rarely been a problem in China," said Stephen Green, an economist at Standard Chartered Bank (China) Ltd.
The Shanghai Composite Index, the benchmark for Chinese shares, has lost more than 20 percent since August 4, mainly due to concerns of a credit reduction.
Media reports said China may have extended 320 billion yuan (US$46.8 billion) in new credit in August, below the previous market expectation of 500 billion yuan.
"The direct impact of new loans on the money injected into the stock market should be small, but the indirect impact on market confidence and the perception of possible policy changes is significant," Green said.
Green estimated China's gross domestic product would grow 8.5 percent this year, ahead of the government target of 8 percent set at the beginning of the year, and it may expand 8.9 percent in 2010.
Wang Qing, an economist at Morgan Stanley, said the stronger-than-expected gain in August manufacturing suggested further broad-based improvements in the Chinese economy.
"We expect August data to present further evidence of positive development. Meanwhile, the low base effect from last year's macroeconomic downturn is gradually kicking in, so the annualized comparisons are expected to turn increasingly favorable in the coming months," Wang said.
He estimated exports would post a 19 percent year on year decline in August, up from the slump of 23 percent in July. The Consumer Price Index, the main gauge of inflation, may have withdrawn 1.2 percent last month, compared with a retreat of 1.8 percent a month earlier.
The Bank of Communications also estimated the CPI fell 1.2 percent in August and may post smaller drops afterwards, making a dip of 0.5 percent year on year for the whole of 2009.
Narrower declines in trade and smaller drops in prices are forecast.
And although the pace of new yuan lending may moderate significantly to curb asset bubbles, the tightening credit trend should not threaten economic recovery, experts said. It could, however, affect market sentiment.
"The market's current focus is on the monthly loan numbers, based on the common view that credit growth is the main force behind equity prices. But this assumption is not quite right. Liquidity has rarely been a problem in China," said Stephen Green, an economist at Standard Chartered Bank (China) Ltd.
The Shanghai Composite Index, the benchmark for Chinese shares, has lost more than 20 percent since August 4, mainly due to concerns of a credit reduction.
Media reports said China may have extended 320 billion yuan (US$46.8 billion) in new credit in August, below the previous market expectation of 500 billion yuan.
"The direct impact of new loans on the money injected into the stock market should be small, but the indirect impact on market confidence and the perception of possible policy changes is significant," Green said.
Green estimated China's gross domestic product would grow 8.5 percent this year, ahead of the government target of 8 percent set at the beginning of the year, and it may expand 8.9 percent in 2010.
Wang Qing, an economist at Morgan Stanley, said the stronger-than-expected gain in August manufacturing suggested further broad-based improvements in the Chinese economy.
"We expect August data to present further evidence of positive development. Meanwhile, the low base effect from last year's macroeconomic downturn is gradually kicking in, so the annualized comparisons are expected to turn increasingly favorable in the coming months," Wang said.
He estimated exports would post a 19 percent year on year decline in August, up from the slump of 23 percent in July. The Consumer Price Index, the main gauge of inflation, may have withdrawn 1.2 percent last month, compared with a retreat of 1.8 percent a month earlier.
The Bank of Communications also estimated the CPI fell 1.2 percent in August and may post smaller drops afterwards, making a dip of 0.5 percent year on year for the whole of 2009.
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