International | Oct 22 2009
By Greg Peel
“In the first three quarters of 2009,” notes the China Bureau of Statistics (in the English translation), “the various localities and departments have conscientiously implemented the arrays of plans by the central government and the State Council on dealing with the international financial crisis and maintaining stable and fast development of the economy. We have attained obvious achievements, and further strengthened the steady upturn trend of the economy. The overall situation of national economy was good.”
Good? The CBS report noted a quarterly increase in GDP of 8.9% at a time when the bulk of the developed world is still hoping to simply reverse the negative readings of past quarters. While China’s GDP growth reached 13% at its peak this century, one might describe a post-GFC reading of 8.9% as something more than “good”. It may have been one tick below the 9.0% estimation of economist consensus, but it is still a spectacular number nevertheless. Assuming, as is always the case with China, that it is accurate.
The first three quarters of 2009 have seen a net 7.7% increase in Chinese GDP, at a growing rate. First quarter growth was 6.1%, second quarter 7.9% and third quarter 8.9%.
Quarterly industrial production increased 12.4% in the third quarter after gains of 5.1% in the first and 9.1% in the second. But a net gain of 8.7% after three quarters (over the same period last year) compared to a 15.2% three quarter gain from 2007 to 2008.
In the period January to August, profits made by industrial enterprises (above a designated size) showed a 10.6% drop over the same period last year, but was a big improvement on the reading of a 32.8% drop in the period January to May.
Following an acceleration in the growth of investment in real estate in particular, fixed asset investment in the first three quarters showed a 33.4% gain, which was better than last year’s reading of a 27.0% gain.
It was nevertheless the reading for “investment in infrastructures” which really stood out. Total investment in infrastructure (excluding electricity) has increased by 52.6% after three quarters, with railway up 87.5%, road up 50.7%, health, social security and social welfare up 72.9%, and real estate development up 17.7%.
Retail sales after three quarters are up 15.1% on last year, or 17.0% inflation adjusted. Within that figure, sales of furniture are up 32.3% and automobiles up 24.5%.
In the month of September, the figures for both the consumer price index (CPI) and producer price index (PPI) reversed from negative to positive. After three quarters however, the CPI is still down 1.1%. The PPI is down 9.5%. (These are headline numbers and include energy costs).
China’s total level of foreign trade continued to drop in the third quarter, and after three quarters is down 20.9% year-on-year. Exports are down 21.3% and imports down 20.4%. The trade surplus totalled US$135.5bn at the end of September, down US$45.5bn (33.5%) from the same time last year.
Chinese disposable income per capita was 9.3% higher after three quarters than it was at the same time last year. Wages and salaries were up 10.2%.
Following a continuing increase in loans to financial institutions, broad money supply (M2) was up 29.3% year-on-year by the end of September. That compares to 17.8% growth at the same time last year.
It’s a funny old place China. The GDP is up 7.7% over three quarters but exports are down 21.3% and the trade surplus has lost 33.5%. That just goes to show how important the 52.6% increase in infrastructure investment has been. And retail sales are up 15.1% and wages up 10.2% but inflation is down 1.1%. It helps to be pegged to the US dollar.
What’s more, a fall of 9.5% in PPI suggests severe deflation but this is offset by a near 30% growth in money supply. Again it’s all about domestic stimulus and the dollar peg.
After all the figures, the Chinese Bureau of Statistics was not exactly ecstatic, as anyone else might be with 8.9% growth. It’s not China’s fault, it’s that wretched foreign GFC brought about by those capitalist imperialists etc, etc (don’t mention the peg). Thus the “arduous task” ahead is to build the domestic economy to offset the severity of the drop in export demand. The CBS concluded:
“At present, it’s the crucial stage for the national economy to realize a stable growth, yet the basis of the economic recovery still needs to be consolidated, and the insufficient external demand is still severe, with the arduous task of expanding domestic demand and adjusting the structures. In the following period, we should continue the implementation of the scientific outlook on development, maintain the consistency and stability of the macro-economic policies in accordance with the central government’s decisions and deployment of economic activities, insist on the proactive fiscal policies and moderately lenient monetary policies, fully implement, enrich and optimize the arrays of plans and policy measures to deal with the international financial crisis. At the same time, we should improve the relevance, flexibility, effectiveness and consistency of the macro-policies, and strive to realize stable and fast development of the national economy.”
Vive Le Chine.