International | May 11 2010
By Rudi Filapek-Vandyck
Economists have started to reduce their GDP growth expectations for China this year. Most will tell you GDP growth will print a much lower figure by Q4 than the 11.9% recorded in Q1 this year. Standard Chartered, for example, now anticipates Q4 GDP growth will print 8%, right on the official target set forward by the central government earlier in the year.
The trajectory to slower growth will be a gradual one, however, and it will require more government actions. Few economists doubt whether interest rates will rise in China this year, it's the timing they cannot agree upon. For the least hawkish ones, today's data may not be strong enough to force Chinese policy makers into imminent action.
The standouts among today's data releases are higher inflation (still below targeted 3%), slower industrial production, more bank lending and even higher property prices.
Property prices in 70 of China's large and medium-sized cities rose 12.8% in April from a year earlier. As such, April marked another acceleration from March's already elevated 11.7% rise.
April was the 11th consecutive month in which urban property prices increased from a year earlier, this despite increasing policy measures aimed at reining in speculation in the property market.
The Bureau of Statistics said investment in real-estate development, one of the main forms of private investment in China, rose 36.2% in the January-April period from a year earlier. Real estate development investment in the January-March period rose 35.1% to CNY659.4 bn.
In addition, financial institutions in China extended CNY774.0 bn worth of new local-currency loans in April, up from CNY510.7 bn in March. April's new yuan loans exceeded the median CNY600 bn forecast of 11 economists polled earlier.
The People's Bank of China raised banks' reserve requirement ratio by half a percentage point for the third time this year. The move, which took effect Monday, is aimed at mopping up liquidity in the domestic banking system amid concerns about inflation and surging prices in the domestic property market.
Data also showed China's broadest measure of money supply, or M2, was up 21.48% at the end of April from a year earlier, slightly below the median 22% rise forecast in the poll, but higher than the 22.5% rise at the end of March.
Note: all the data releases mentioned were higher than economist forecasts.
Economists remain divided on whether China will raise interest rates soon. Some point at the inflation figures which are unmistakably on the rise, but still below the official 3% target, indicating Chinese policy makers might wait a little longer before using interest rates as a tightening tool.
The gain in consumer prices in April compared with a 2.4% increase in March and the 2.7% median estimate of 30 economists surveyed by Bloomberg News. Producer prices surprised to the upside too, jumping 6.8%.
China's industrial production, on the other hand, grew by 17.8% in April compared to a year earlier. This was slower than the 18.1% increase in March, while the median forecast economists surveyed by news wires stood at 18.6-18.5%. Fixed-asset investment in China's urban areas rose 26.1% in the January-April period from a year earlier, slowing only slightly from the 26.4% growth in the January-March period. China only issues year-to-date data for urban FAI. According to Dow Jones, economists had expected urban FAI to rise 26.0% in the January-April period from a year earlier.
Retail sales in April rose 18.5% from a year earlier, picking up from March's 18% increase.
