Monday 23 February 2009

China stagnating again this quarter: Morgan

For the second quarter in a row, China will record little or no growth between January and March compared with the preceding three-month period, Stephen Roach, chairman of Morgan Stanley Asia, said yesterday.

1 comment:

Guanyu said...

China stagnating again this quarter: Morgan

Reuters
21 February 2009

For the second quarter in a row, China will record little or no growth between January and March compared with the preceding three-month period, Stephen Roach, chairman of Morgan Stanley Asia, said yesterday.

China reported 6.8 per cent growth in the fourth quarter compared with a year earlier, but Mr. Roach said this failed to reflect the sudden loss of momentum late in the year as exports and industrial output slumped in response to the global crisis. ‘On a sequential basis, fourth quarter relative to third quarter, we think the number was closer to zero and likely remained that weak in the first quarter of 2009,’ he told reporters.

Some economists have cited a strengthening in China’s purchasing managers’ indexes, along with a modest rebound in metals prices and global bulk shipping rates, to argue that the world’s third-largest economy may have already touched bottom.

Vice-Commerce Minister Zhong Shan said in Hong Kong yesterday that China was confident of meeting its target of 8 per cent growth in GDP in 2009, according to state media reports. But Mr. Roach said that, given the weak start to 2009, growth this year was likely to be no higher than 5.5 per cent.

China unveiled a four trillion yuan (S$898 billion) stimulus package in November, triggering a surge in new credit as banks responded to government calls to lend more freely. Banks extended a record 1.62 trillion yuan in new loans in January, which some economists took as a further sign that the stimulus was kicking in.

But lending by China’s big four state-owned banks, which generally account for half of all loans, was no more than about 150 billion yuan in the first half of February, Caijing business magazine reported yesterday.

Mr. Roach urged Beijing to respond to the global downturn by sticking to the path of reform and doing more to spur consumption.

Domestic demand was needed to take the place of exports, which he said were unlikely to revive any time soon given the prospect of as much as five years of sub-par US consumption.

‘China must recognise that this recession is a wake-up call to the old model of export-led growth that has served China so well over the last 30 years,’ Mr. Roach added.