International | Jan 21 2010
By Rudi Filapek-Vandyck
In line with expectations, economic growth in China in the fourth quarter of calendar 2009 accelerated to the fastest pace since 2007. However, what did surprise is that the ultimate growth figure, at 10.7%, was even higher than market consensus at 10.5%. It has to be noted though there are quite a few China-watchers around who were expecting a number closer to 11%.
In Q3 China’s GDP growth stood at 8.9%.
Contrary to last year, when such strong data were universally welcomed as a positive signal for the global economy as a whole, this year’s context is one wherein Chinese authorities are trying to apply the brakes on an economy which otherwise risks overheating. As such, today’s strong Q4 GDP will do nothing to stem market fears that further tightening measures, including higher official interest rates, are yet to follow.
Expectations that China will soon see higher interest rates would have received another boost today with consumer prices having risen 1.9% from a year earlier in December, following a 0.6% advance in November. This suggests Chinese inflation is firmly back, and on an upward trajectory. Producer prices rose 1.7% in December from a year ago after declining for the previous twelve months.
All of the above data, released today, beat market expectations.
Industrial production improved by 18.5% in December from a year earlier, which is a little below market expectations for 19.6% growth, and retail sales for the month were up 1.5%, above market expectations. Urban fixed-asset investment fell somewhat short of market expectations, with a reported growth of 30.5% for December compared with market consensus at 31.5%.
Last year China overtook the US as the world’s biggest auto market, as well as Germany as the world’s single biggest exporter. If we leave aside the fact that the European Union operates as one single economic zone, then China is poised to overtake Japan and become the world’s number two (single country) economy sometime in 2010.