China Watch Blog

China Watch Blog reports that Hong Kong’s economy grew 2.8% in real terms year-on-year in the first quarter, Government Economist Helen Chan announces.

On a seasonally adjusted quarter-to-quarter comparison, real GDP expanded by 0.2%.

China Watch Blog reports that the headline “Economy may have bottomed out in Q3″ was screaming at the public from the headlines of China Daily, but has it really?

Some officials and analysts are quoted in the report as saying that “the worst may be over as the economy shows signs of bottoming out”, despite GDP growth hitting 7.4% in the third quarter, a low of more than three years.

The report quoted Premier Wen Jiabao as saying on Wednesday at an executive meeting of the State Council that “growth has started to stabilize amid positive changes in the third quarter”, and the economy is on track to achieve its annual GDP growth target of 7.5%.

GDP growth was 8.1 percent in the first quarter, and 7.6 percent in the second, according to the National Bureau of Statistics. But September’s monthly industrial production growth accelerated to 9.2 percent year-on-year from the 38-month low of 8.9 percent in August, indicating growing domestic demand.

Growth of retail sales of consumer goods swelled to a six-month high of 14.2 percent, against 13.2 percent in August. The run-up to National Day saw increased consumer demand.

The NBS also showed that growth in fixed-asset investments reached 20.5 percent year-on-year in the first three quarters.

Hopefully, the country’s optimism will really turn out to be true, because all is still not well in the Eurozone and in the US as well.

China Watch Blog has learnt that Credit Suisse Group AG has cut its forecast for China’s economic growth this year to 7.7 percent – the latest firm to lower its GDP estimate after the world’s second largest economy weakened.

Shanghai's Yangshan deepwater container port sees signs of slowdown

The Shanghai Daily quoted Credit Suisse as saying that the slashed forecast was based on China’s falling corporate profits and an investment slowdown.

“Investment is unlikely to see a meaningful rebound in the foreseeable future,” said Tao Dong, chief China economist at Credit Suisse, predicting the country will face “years of weak growth.”

But the bank’s estimate was still higher than the government’s target, which was lowered to 7.5 percent this year from a previous 8 percent in place since 2005.

The government set the target during the 12th Five-Year Plan (2011-2015) period at 7 percent to reflect the need for economic restructuring. The plan gives priority to improving people’s livelihoods while taking into account global economic uncertainties.

In April, the World Bank adjusted its estimate to 8.2 percent growth this year from 8.7 percent. The Asian Development Bank also lowered its projection to 8.5 percent from 9.1 percent, citing external risks that threaten China’s exports.

China’s economic growth may weaken this quarter to the slowest in three years mainly due to the curbs on the property sector and weak external demand, the central government’s think-tank said in a report.

The China Information Center forecast the country’s gross domestic product will grow 7.5 percent in the second quarter of this year from the same period of last year, the slowest since the first quarter in 2009.

The forecast is in line with Premier Wen Jiabao’s remarks in March, and was lower than the 8.1 percent growth in the year’s first three months.

The report said the two factors contributing to the slowdown are “the pains” China must face during the transformation and upgrade of its economic structure.

The report comes as data showed that home prices in the country, excluding those for government-funded affordable housing, fell last month in 46 of the 70 cities tracked by the National Bureau of Statistics, a record high since the figures were first released.

The think-tank also expected inflation to cool to 3.3 percent in the second quarter due to weaker domestic demand. The Consumer Price Index rose 3.4 percent in April on an annual basis.

“China should step up fine tuning of economic policies,” the report said. “It should implement tax cuts, increase support for technological transformation, and reduce fundraising cost for companies to sustain stable economic growth.”

China Watch Blog has learnt that China’s inflation rate in March rebounded more than expected due to higher food costs, with the Consumer Price Index (CPI), the main gauge of inflation, rising 3.6 percent from a year earlier last month.

Food prices increase pushing up inflation

According to the National Bureau of Statistics, CPI was up from February’s 3.2 percent and more than the previous market expectation of 3.5 percent and food costs increased 7.5 percent year on year, compared with 6.2 percent in February.

According to the National Bureau of Statistics, its is trickier for the world’s second-largest economy to add growth-supportive measures.

Li Maoyu, an analyst at Changjiang Securities Co, was quoted as saying in a Shanghai Daily report that, “Such a rate may invite policymakers to be more cautious of any moves to stimulate the economy.”

Li said recent signals of consumer goods experiencing a new round of price increases triggered inflationary expectations again.

Last month, China raised the retail prices for gasoline and diesel by a larger-than-expected margin, and planned to introduce a graduated power tariff system. Afterwards, there were reports of higher prices of milk powder, cooking oil, fast food and shampoo, while producers cited more expensive raw materials and labor costs for their price jumps.

Cheng Siwei, a renowned economist and former vice chairman of China’s top legislature, said last week in Shanghai that the country should remain alert to inflation because speculative money tended to flow into the real goods market and bolster consumer prices when both housing and stock markets were weak.

Some other analysts were optimistic.

Lian Ping, chief economist at Bank of Communications, said inflation was still controllable and the country requires more measures to boost growth.

“Despite a rebound, it was the second month for the inflation rate to fall below the government target of 4 percent,” Lian said. “Considering the economic growth which may ease further, the country should cut the reserve requirement ratio at least once to stimulate the economy.”

China is to unveil the first-quarter gross domestic product growth on Friday, and economists estimated it will moderate to around 8.5 percent, down from 8.9 percent in the final quarter of 2011.

Deflating producer prices were another sign to dismiss inflationary pressure.

The Producer Price Index, a factory-gate measurement of inflation, lost 0.3 percent on an annual basis in March, the lowest since December, 2009.

China Watch Blog has learnt that China’s GDP growth may have slowed to about 8.4 percent year-on-year in the first quarter, still boding well for the economy in 2012.

A China Daily report cited Zhang Xiaoqiang, deputy director of the National Development and Reform Commission, as saying that preliminary data from research agencies showed that the country’s consumer price index, a main gauge of inflation, is likely to rise 3.5 percent year-on-year in the first quarter.

The National Bureau of Statistics is due to officially announce the quarter’s CPI figure on April 9 and GDP on April 13.

“Stable growth has been set as the tone for 2012 by the government in the context of the uncertainties and challenges of the world economy,” Zhang said at a lunch session of the Boao Forum for Asia 2012.

There is no “hard landing” to worry about, unless growth drops to 7 percent for two consecutive quarters, said Zhang Yuyan, director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences.

The nation will cut its 2012 growth target to an eight-year low of 7.5 percent and hold the CPI target at around 4 percent, according to the government work report delivered by Premier Wen Jiabao last month.

Wen said on Tuesday that despite the decline of a few major economic indicators, China’s economy as a whole continues to grow as the government anticipated in its exercise of macro controls.

Despite the falls, major economic indicators are still at reasonable levels, and confidence should be maintained in the country’s economic work, said Wen during a three-day inspection trip to Fujian province and the Guangxi Zhuang autonomous.

As the deputy director in charge of foreign capital use and the high-tech industry, Zhang also emphasized that China will continue to improve its investment environment and deepen cooperation with other Asian countries.

China Watch Blog has learnt that China’s economic growth is expected to ease to 8.2 percent in the first quarter of this year from 8.9 percent in the last quarter of 2011.

The China Daily reported citing a report issued on Saturday by the Bank of China saying that the country’s annual GDP growth is to rebound to 8.4 percent in the April-June period and the GDP growth rate will remain over 8 percent for the whole of 2012, just above the government’s 7.5-percent target for the year.

The consumer price index (CPI), a main gauge of inflation, is expected to rise by 3.6 percent and 3.0 percent year-on-year in the first and second quarters, respectively, the report said.

The report said sluggish growth for China’s trading partners in the European Union, the United States and Japan, as well as excessive industrial capacity and shrinking domestic demand, will be major challenges for the economy this year.

Despite these challenges, China will be able to maintain stable growth courtesy of increased investment in affordable housing projects and an initiative to give private capital access to railway, public facility and financial investment, it said.

First quarter economic data, including GDP growth and CPI figures, is due for release on April 13.

China Watch Blog has learnt that Shenzhen’s GDP will rank 11th in the world in 2025, according to a research report by McKinsey & Company, a global management consultancy.

View of Shenzhen from bridging linking Hong Kong to Huanggang checkpoint

In addition to GDP, the report also predicts the top 25 cities in the world for 2025 in another six categories: per capita GDP, GDP growth rate, population, child population, household number and the number of households with a yearly income of over US$20,000.

The company released the report, “The City 600,” at the International Conference on Urban Development and Innovation, which concluded in Shenzhen on Friday, according to GZNews.com.

Shenzhen ranks sixth in terms of GDP growth rate and 21st in terms of the number of households with a yearly income of over US$20,000. Shenzhen is not in the top 25 in per capita GDP or child population.

Jonathan Woetzel, a Shanghai-based director with McKinsey & Company, said the per capita GDP is often high in comparatively small cities such as Macao and Doha. Meanwhile, the child population is to some degree decided by a government’s policy on population control.

However, Woetzel said Shenzhen, along with many other Chinese cities, has the potential to become a global metropolis by 2025.

“It is a major challenge for China to raise its efficiency and per capita GDP. We hope Shenzhen can achieve it,” said Woetzel.

Woetzel added that urbanization is the biggest factor in the global economic growth and the development of China’s cities has a large impact on the global economy.

In terms of GDP in 2025, New York and Tokyo come in the first two places, which are followed by Shanghai and London.

There will be more than 100 Chinese cities in the top 600, according to the report. By 2025, the top 600 cities in the world will contribute to more than 60 percent of the global GDP.

China Watch Blog reports that Hong Kong’s Gross Domestic Product grew by 5% in real terms in 2011 and the underlying inflation rate averaged 5.3%, a marked rise from the 1.7% rate in 2010.

Delivering his 2012-13 Budget today, Financial Secretary John Tsang said exports steadied in the fourth quarter to bring growth for 2011 to 3.6% in real terms.

He said Hong Kong lost 62,000 jobs during the economic recession in the wake of the financial tsunami but the unemployment rate rebounded slightly to 3.3% towards the end of 2011, which still represented full employment.

Mr Tsang said the Government’s measures to stabilise the economy and the tenacity of Hong Kong people have helped the city come through crisis after crisis.

China Watch Blog has learnt that China’s annual GDP growth is expected to reach 9.2 percent this year and continues to experience a moderate cooling in 2012.

Shanghai airport

Expansion of the country’s industrial production in 2012 will also witness a growth pace that is one or two percentage points lower compared with this year, Huang Libin, an official at the Ministry of Industry and Information Technology, was quoted as saying in a China Daily report.

Huang expected the country’s industrial value-added output to rise by around 14 percent year-on-year this year.

Growth of exports, one of the major engines for the world’s second largest economy, may slow further next year amid sovereign-debt morass in other countries, rising protectionism and increasing pressure for the yuan to appreciate, he said.

“Although the current moderation is in line with the country’s macro-economic regulations, the trend of an acceleration in the slowdown should be monitored,” he said.

He noted that one of the government’s tasks next year should be to prevent major economic fluctuations caused by increasing uncertainties both at home and abroad.

Huang also said the timing and strength of regulations should be better tailored to prevent them having an accumulated impact on economic growth.