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Friday, 4 September 2009
Liquidity curbs in China unlikely: HSBC analyst
Recent fears among investors in the Shanghai stock market that the Chinese government is reining in liquidity are unfounded, said HSBC chief China economist Qu Hongbin.
Recent fears among investors in the Shanghai stock market that the Chinese government is reining in liquidity are unfounded, said HSBC chief China economist Qu Hongbin.
He believes Beijing will not tighten its policy in this manner any time soon, as the government-led recovery has not filtered through to the private sector.
Last month, the Shanghai Composite Index plunged nearly 22 per cent, sparking a trail of red ink in regional markets, including Singapore.
‘That had very little to do with economic fundamentals,’ he told The Straits Times on Wednesday.
‘It’s still too early to worry about excessive growth, as the private sector has not yet recovered.’
A tightening of policy is unlikely until the middle of next year at the very earliest, he added.
Beijing will look out for three signs before it starts to worry about an overheating economy and pursue a tightening policy, he noted.
These are: the economic growth rate recovering to more than 10 per cent; inflation crossing the 3 per cent mark; and exports seeing double-digit growth.
Mr. Qu is bullish about China’s growth and recovery prospects and expects the infrastructure-led rebound to be sustainable into next year.
This is because infrastructure projects, which are the main driver of investment acceleration, tend to have a multi-year impact.
Even if the United States suffers a double-dip recession - defined as a downturn followed by a short-lived recovery, then another recession - China can still continue to grow, he said.
For instance, there is still room for further infrastructure spending. The entire length of China’s railways is only 6 per cent of the world’s total, but it is used for the transportation of more than 24 per cent of the world’s freight, he noted.
He tips more upside risks than downside risks for China’s growth next year. China’s infrastructure-led investment is likely to remain strong into next year, and consumer spending is expected to hold up reasonably well.
The only uncertainty is exports, which are still falling and could be the big swing factor for China’s growth outlook into next year.
Mr. Qu said: ‘If exports stabilise or rise moderately, that would mean China can achieve 9 per cent to 10 per cent growth next year, assuming 8 per cent growth this year.
‘But if there is an upside surprise in Chinese export growth, this may cause an overheating problem.’
1 comment:
Liquidity curbs in China unlikely: HSBC analyst
By Alvin Foo
04 September 2009
Recent fears among investors in the Shanghai stock market that the Chinese government is reining in liquidity are unfounded, said HSBC chief China economist Qu Hongbin.
He believes Beijing will not tighten its policy in this manner any time soon, as the government-led recovery has not filtered through to the private sector.
Last month, the Shanghai Composite Index plunged nearly 22 per cent, sparking a trail of red ink in regional markets, including Singapore.
‘That had very little to do with economic fundamentals,’ he told The Straits Times on Wednesday.
‘It’s still too early to worry about excessive growth, as the private sector has not yet recovered.’
A tightening of policy is unlikely until the middle of next year at the very earliest, he added.
Beijing will look out for three signs before it starts to worry about an overheating economy and pursue a tightening policy, he noted.
These are: the economic growth rate recovering to more than 10 per cent; inflation crossing the 3 per cent mark; and exports seeing double-digit growth.
Mr. Qu is bullish about China’s growth and recovery prospects and expects the infrastructure-led rebound to be sustainable into next year.
This is because infrastructure projects, which are the main driver of investment acceleration, tend to have a multi-year impact.
Even if the United States suffers a double-dip recession - defined as a downturn followed by a short-lived recovery, then another recession - China can still continue to grow, he said.
For instance, there is still room for further infrastructure spending. The entire length of China’s railways is only 6 per cent of the world’s total, but it is used for the transportation of more than 24 per cent of the world’s freight, he noted.
He tips more upside risks than downside risks for China’s growth next year. China’s infrastructure-led investment is likely to remain strong into next year, and consumer spending is expected to hold up reasonably well.
The only uncertainty is exports, which are still falling and could be the big swing factor for China’s growth outlook into next year.
Mr. Qu said: ‘If exports stabilise or rise moderately, that would mean China can achieve 9 per cent to 10 per cent growth next year, assuming 8 per cent growth this year.
‘But if there is an upside surprise in Chinese export growth, this may cause an overheating problem.’
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