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Friday, 12 December 2008
China Retail Sales Hold Up Well, But Outlook Weak
Chinese retail sales held up better than expected in November, but the government said some industries had run into severe trouble and forecast further weakness next quarter before the economy bottoms out.
Chinese retail sales held up better than expected in November, but the government said some industries had run into severe trouble and forecast further weakness next quarter before the economy bottoms out.
The National Bureau of Statistics said sales growth slowed to 20.8 percent in the year to November from October’s reading of 22.0 percent, modestly beating forecasts of a 20.5 percent rise.
But economists were wary of reading too much into the figures and said consumer spending could wilt as the broader economic weakness shakes confidence.
“It’s going to be a test for policy makers in Beijing whether they can engineer a soft landing, and the consumer response will be an important part of that,” said David Cohen with Action Economics in Singapore.
The Ministry of Industry and Information Technology said industrial output growth continued to slow in November, from 8.2 percent in the year to October, and acknowledged that some industries had faced “serious difficulties” last month.
The tone of the ministry’s comments, in a statement issued at a news conference, stood out from the daily barrage of rosy official pronouncements aimed at shoring up confidence as China goes through its sharpest economic slump in a decade.
Haunted by the spectre of rising unemployment, officials are on a campaign dubbed “protect eight” -- shorthand for the goal of achieving 8 percent growth next year, the minimum rate deemed necessary to create enough jobs for the millions of people entering the work force each year.
Jin Liqun, a senior official at China Investment Corp, the country’s sovereign wealth fund, said on Friday he saw no difficulty in attaining 8 percent growth in 2009.
A rate of 9 percent was possible thanks to what he called “timely and effective” policies rolled out by the government.
Government Policies
To prop up growth, the government launched a 4 trillion yuan ($586 billion) stimulus plan on Nov. 9, while the central bank slashed interest rates on Nov. 26 by 1.08 percentage points -- four times its usual margin.
China’s top leaders followed up on Wednesday with a pledge after a three-day strategy meeting to ramp up public spending and cut taxes to promote domestic demand.
“I believe, with the correct policies from the central government, the Chinese economy should not and will not have major problems next year,” Liu He, deputy director of the central leading group for financial and economic affairs, told a forum.
He said many Chinese companies had been too optimistic and so had built up excessive inventories of finished goods and raw materials that were now being worked off.
“It is inevitable for such an adjustment to happen, and the slowdown may look severe, but don’t panic about this,” Liu said.
After a slow first quarter of 2009, many industrial firms would return to normal operations, Liu said; moreover, Chinese exports were still likely to grow next year despite the first drop in seven years in November from the year-earlier level.
Lu Zhengwei, chief economist at Industrial Bank in Shanghai, was less optimistic.
“In my view, China has to speed up efforts to boost export growth. Neither consumption nor investment can replace exports in driving growth,” he said.
“So China will roll out more measures to help exporters in the next fewmonths. It’s almost certain that the government will let the yuan weaken, especially against U.S. dollar. The question is when and by how much,” Lu added.
Jun Ma, chief China economist at Deutsche Bank in Hong Kong, said he expected retail sales to grow just 13 percent next year -- partly because fast-falling inflation lowers the headline figure, which measures sales in nominal terms.
“I think this marks the beginning of a prolonged deceleration of retail sales growth,” Ma said.
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China Retail Sales Hold Up Well, But Outlook Weak
Reuters
12 December 2008
Chinese retail sales held up better than expected in November, but the government said some industries had run into severe trouble and forecast further weakness next quarter before the economy bottoms out.
The National Bureau of Statistics said sales growth slowed to 20.8 percent in the year to November from October’s reading of 22.0 percent, modestly beating forecasts of a 20.5 percent rise.
But economists were wary of reading too much into the figures and said consumer spending could wilt as the broader economic weakness shakes confidence.
“It’s going to be a test for policy makers in Beijing whether they can engineer a soft landing, and the consumer response will be an important part of that,” said David Cohen with Action Economics in Singapore.
The Ministry of Industry and Information Technology said industrial output growth continued to slow in November, from 8.2 percent in the year to October, and acknowledged that some industries had faced “serious difficulties” last month.
The tone of the ministry’s comments, in a statement issued at a news conference, stood out from the daily barrage of rosy official pronouncements aimed at shoring up confidence as China goes through its sharpest economic slump in a decade.
Haunted by the spectre of rising unemployment, officials are on a campaign dubbed “protect eight” -- shorthand for the goal of achieving 8 percent growth next year, the minimum rate deemed necessary to create enough jobs for the millions of people entering the work force each year.
Jin Liqun, a senior official at China Investment Corp, the country’s sovereign wealth fund, said on Friday he saw no difficulty in attaining 8 percent growth in 2009.
A rate of 9 percent was possible thanks to what he called “timely and effective” policies rolled out by the government.
Government Policies
To prop up growth, the government launched a 4 trillion yuan ($586 billion) stimulus plan on Nov. 9, while the central bank slashed interest rates on Nov. 26 by 1.08 percentage points -- four times its usual margin.
China’s top leaders followed up on Wednesday with a pledge after a three-day strategy meeting to ramp up public spending and cut taxes to promote domestic demand.
“I believe, with the correct policies from the central government, the Chinese economy should not and will not have major problems next year,” Liu He, deputy director of the central leading group for financial and economic affairs, told a forum.
He said many Chinese companies had been too optimistic and so had built up excessive inventories of finished goods and raw materials that were now being worked off.
“It is inevitable for such an adjustment to happen, and the slowdown may look severe, but don’t panic about this,” Liu said.
After a slow first quarter of 2009, many industrial firms would return to normal operations, Liu said; moreover, Chinese exports were still likely to grow next year despite the first drop in seven years in November from the year-earlier level.
Lu Zhengwei, chief economist at Industrial Bank in Shanghai, was less optimistic.
“In my view, China has to speed up efforts to boost export growth. Neither consumption nor investment can replace exports in driving growth,” he said.
“So China will roll out more measures to help exporters in the next fewmonths. It’s almost certain that the government will let the yuan weaken, especially against U.S. dollar. The question is when and by how much,” Lu added.
Jun Ma, chief China economist at Deutsche Bank in Hong Kong, said he expected retail sales to grow just 13 percent next year -- partly because fast-falling inflation lowers the headline figure, which measures sales in nominal terms.
“I think this marks the beginning of a prolonged deceleration of retail sales growth,” Ma said.
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