Economic Preview
Jan. 19, 2010, 8:16 p.m. EST · Recommend · Post:
China's economy seen expanding at double-digit pace
By Chris Oliver, MarketWatch
HONG KONG (MarketWatch) -- China's flood of economic data due out Thursday, including a growth rate expected to be in the double digits, may offer clues to when Beijing will begin hitting the brakes on its speeding economy, set to soon overtake Japan as the world's second largest.
A survey of economists by Dow Jones Newswires tips China's gross domestic product to have grown by 10.8% in the fourth quarter from a year earlier, while a separate survey by Reuters expects 10.9% growth.
Some analysts go further, predicting growth in the October-to-December period may surprise on the high side, adding to the worries of a central bank that's already grappling with surging real-estate prices and rising inflation expectations.
Bank of America Merrill Lynch economist Ting Lu in Hong Kong said growth figures that are on high side would embolden policy makers to "carry out tightening measures to cool property prices and curtail liquidity." Merrill Lynch tipped growth of 11.2% in the fourth quarter.
The quarterly GDP data, along with inflation, urban fixed-asset investment, retail sales, and industrial output, are due to be released Thursday at 10:00 a.m. local time (Wednesday 9:00 p.m. U.S. Eastern time).
For the full year, the Dow Jones poll put average expectations for GDP growth at 8.5% in 2009, down from 9.6% in 2008.
Myth Vs. Reality of China's Yuan Funds
Hong Kong bureau chief Peter Stein speaks with Asia M&A reporter Rick Carew about how draft guidelines might affect the way yuan-denominated private equity funds set up by the likes of Blackstone Group and Carlyle Group do business in China.
National Bureau of Statistics chief economist Yao Jingyuan was cited in reports as saying Sunday that growth will outpace the government's 8% target for the year and continue to accelerate in 2010.
Throughout 2009, China's story has been one of an accelerating recovery. In the first quarter of 2009, the economy expanded 6.1%, its slowest pace in nearly two decades, followed by a 7.9% expansion in the second, and 8.9% in the third.
Among the other data due to be released, urban fixed-asset investment -- the key measure of capital spending in China -- likely grew 31.4% in 2009, easing from the 32.1% rise in the first 11 months of the year, but above 2008's 26.1% increase, according to the economists polled in the Dow Jones survey.
Tightening sounds
Last week, the People's Bank of China lifted the ratio of reserves that banks must set aside, its first adjustment to the policy since mid-2008.
Analysts interpreted the move, which will require most commercial banks to set aside 16% of deposits as reserves, as an indication it wants to tighten liquidity in the banking system. Read analysis of China's apparent policy tightening.
On Tuesday, the central bank hiked the yield on its benchmark one-year bills, the third such move this month after adjustments to its one-year and three-month bill rates. Read full story on China yield rise.
Analysts, however, were divided on the pace and timing of future interest rates or other major policy moves by the central bank.
Royal Bank of Scotland said the PBOC will likely lift its one-year lending rate in the second quarter, as it assesses growing inflationary pressures and robust monthly economic data.
Consensus estimates, however, are for the PBOC to begin its hiking cycle in the third quarter.
The impetus for the rate hike, RBS says, will come from surging export growth of around 30% and consumer inflation of around 2.5%, which should be evident in the monthly data rounding out the first quarter.
"Households recollect the double-digit inflation of the early 1990s and are aware that the inflation can rise rapidly," RBS economist Ben Simfendorfer in a note.
He added the number of household that currently view inflation as "too high" has reached its strongest reading since 2006.
The median expectation from a Dow Jones Newswires poll calls for December's consumer price index to post a rise of 1.7% from the year-earlier month, and for the producer price index to gain 0.5%. CPI rose 0.6% year-on-year in November, while the PPI fell 2.1%.
Simfendorfer said that this year, China's rapidly expanding economy will likely overtake Japan as the world's second largest, after that of the U.S.
Others doubt that China will embark on an interest-rate hiking cycle any time soon, amid fears that such a move would only attract inflows of foreign capital.
Data released last Friday showed that China's foreign exchange reserves surged by $126.4 billion in the fourth quarter to a record $2.4 trillion. Merrill estimates about $48 billion of the figure represents inflows of funds betting on an upward revaluation of the Chinese currency.
Merrill said the PBOC will likely push back plans for an interest-rate hike to the fourth quarter, from what was likely an intention to hike in the third quarter, focusing instead on adjustments to the reserve requirement to withdraw excess liquidity from the banking system.
Jan. 19, 2010, 8:16 p.m. EST · Recommend · Post:
China's economy seen expanding at double-digit pace
By Chris Oliver, MarketWatch
HONG KONG (MarketWatch) -- China's flood of economic data due out Thursday, including a growth rate expected to be in the double digits, may offer clues to when Beijing will begin hitting the brakes on its speeding economy, set to soon overtake Japan as the world's second largest.
A survey of economists by Dow Jones Newswires tips China's gross domestic product to have grown by 10.8% in the fourth quarter from a year earlier, while a separate survey by Reuters expects 10.9% growth.
Some analysts go further, predicting growth in the October-to-December period may surprise on the high side, adding to the worries of a central bank that's already grappling with surging real-estate prices and rising inflation expectations.
Bank of America Merrill Lynch economist Ting Lu in Hong Kong said growth figures that are on high side would embolden policy makers to "carry out tightening measures to cool property prices and curtail liquidity." Merrill Lynch tipped growth of 11.2% in the fourth quarter.
The quarterly GDP data, along with inflation, urban fixed-asset investment, retail sales, and industrial output, are due to be released Thursday at 10:00 a.m. local time (Wednesday 9:00 p.m. U.S. Eastern time).
For the full year, the Dow Jones poll put average expectations for GDP growth at 8.5% in 2009, down from 9.6% in 2008.
Myth Vs. Reality of China's Yuan Funds
Hong Kong bureau chief Peter Stein speaks with Asia M&A reporter Rick Carew about how draft guidelines might affect the way yuan-denominated private equity funds set up by the likes of Blackstone Group and Carlyle Group do business in China.
National Bureau of Statistics chief economist Yao Jingyuan was cited in reports as saying Sunday that growth will outpace the government's 8% target for the year and continue to accelerate in 2010.
Throughout 2009, China's story has been one of an accelerating recovery. In the first quarter of 2009, the economy expanded 6.1%, its slowest pace in nearly two decades, followed by a 7.9% expansion in the second, and 8.9% in the third.
Among the other data due to be released, urban fixed-asset investment -- the key measure of capital spending in China -- likely grew 31.4% in 2009, easing from the 32.1% rise in the first 11 months of the year, but above 2008's 26.1% increase, according to the economists polled in the Dow Jones survey.
Tightening sounds
Last week, the People's Bank of China lifted the ratio of reserves that banks must set aside, its first adjustment to the policy since mid-2008.
Analysts interpreted the move, which will require most commercial banks to set aside 16% of deposits as reserves, as an indication it wants to tighten liquidity in the banking system. Read analysis of China's apparent policy tightening.
On Tuesday, the central bank hiked the yield on its benchmark one-year bills, the third such move this month after adjustments to its one-year and three-month bill rates. Read full story on China yield rise.
Analysts, however, were divided on the pace and timing of future interest rates or other major policy moves by the central bank.
Royal Bank of Scotland said the PBOC will likely lift its one-year lending rate in the second quarter, as it assesses growing inflationary pressures and robust monthly economic data.
Consensus estimates, however, are for the PBOC to begin its hiking cycle in the third quarter.
The impetus for the rate hike, RBS says, will come from surging export growth of around 30% and consumer inflation of around 2.5%, which should be evident in the monthly data rounding out the first quarter.
"Households recollect the double-digit inflation of the early 1990s and are aware that the inflation can rise rapidly," RBS economist Ben Simfendorfer in a note.
He added the number of household that currently view inflation as "too high" has reached its strongest reading since 2006.
The median expectation from a Dow Jones Newswires poll calls for December's consumer price index to post a rise of 1.7% from the year-earlier month, and for the producer price index to gain 0.5%. CPI rose 0.6% year-on-year in November, while the PPI fell 2.1%.
Simfendorfer said that this year, China's rapidly expanding economy will likely overtake Japan as the world's second largest, after that of the U.S.
Others doubt that China will embark on an interest-rate hiking cycle any time soon, amid fears that such a move would only attract inflows of foreign capital.
Data released last Friday showed that China's foreign exchange reserves surged by $126.4 billion in the fourth quarter to a record $2.4 trillion. Merrill estimates about $48 billion of the figure represents inflows of funds betting on an upward revaluation of the Chinese currency.
Merrill said the PBOC will likely push back plans for an interest-rate hike to the fourth quarter, from what was likely an intention to hike in the third quarter, focusing instead on adjustments to the reserve requirement to withdraw excess liquidity from the banking system.