International | Jan 22 2009
By Rudi Filapek-Vandyck
Let’s call it the end of a double digit growth era. China’s official GDP growth data have been released today and they have in essence confirmed what most experts already knew: the downward trend in economic growth for the country is showing no sign of abating.
According to official numbers released today, the December quarter saw GDP growth of 6.8%, well below the 9% recorded in the previous three-month period. In the first quarter of 2008 GDP was still at 10.6%, but it has come down quickly and consistently ever since.
The 6.8% figure pulls down GDP growth for the whole of 2008 to 9%. Hong Kong-based chief China economist at Morgan Stanley, Wang Qing, believes China’s GDP growth figure for the present quarter will fall as low as 3-4%. Ryan Atkinson, chief market analyst at New York-based hedge-fund manager Balestra Capital, is probably the lowest marker at this point in time with a GDP growth prediction of 2% for the whole of 2009.
In 2007 China recorded official GDP growth of 13%.
Lower growth projections are expected to lead to higher unemployment in the country this year. A China economist at UBS in Beijing, Wang Tao, estimates that as many as 10m people might lose their jobs in export industries on top of an estimated 5m people who will lose their jobs as a result of the downturn in the Chinese construction sector.
In other government data released today, China’s consumer price index rose 5.9% last year, higher than the 4.8% increase in 2007. No December CPI figure was given, but according to wire services, Chinese local media reported today the December CPI likely rose 1.2%. This would compare with a November CPI of 2.4% and economist expectations of 1.6%.
Other data such as PPI and retail sales were all released for the whole of calendar 2008, making precise assessment and comparison nearly impossible at this stage.
Bottom line: expect more stimulus initiatives from the Chinese government, including further cuts to interest rates by the Chinese central bank. In addition, the danger has grown for a devaluation of the Chinese currency.