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Monday, 26 October 2009
China economy seen slowing next year
China may face an economic slowdown in the middle of next year because the nation’s growth model is unsustainable, said Stephen Roach, chairman of Morgan Stanley Asia.
(SHANGHAI) China may face an economic slowdown in the middle of next year because the nation’s growth model is unsustainable, said Stephen Roach, chairman of Morgan Stanley Asia.
Economic growth in China accelerated to 8.9 per cent last quarter, fuelled by government stimulus spending and more than US$1 trillion of new bank lending. That rebound is causing complacency in China, which still faces ‘tough challenges in years ahead’, Mr. Roach said over the weekend at a financial forum in Shanghai.
‘China’s growth model is much more about supply than demand,’ Mr. Roach said. ‘It’s not a sustainable model for China. It’s not a sustainable model for any nation.’
The ‘imbalance’ created by China’s overdependence on exports for growth was compounded by the government’s efforts to bolster the world’s third-biggest economy as the global recession sapped demand for Chinese-made toys, clothes and electronics, Mr. Roach said.
China’s stimulus measures have also raised concerns about overcapacity and asset bubbles.
‘Macro imbalances are particularly acute right now,’ Mr. Roach said. ‘China’s economy risks slowdown again around mid-2010.’
China’s exports in September fell 15.2 per cent from a year earlier, the smallest decline in nine months. The nation has posted export declines for 11 consecutive months.
The government’s US$586 billion stimulus plan unveiled in November last year spans earthquake reconstruction work, roads, railways and low-cost housing. Chinese banks doled out a record 8.67 trillion yuan (S$1.77 trillion) of new loans in the first nine months, more than double the same period a year earlier.
That helped economic growth accelerate even as exports worsened. China grew 6.1 per cent in the first quarter of this year, the slowest pace of expansion in almost a decade, as shipments abroad fell 17.1 per cent during the period. Growth picked up to 7.9 per cent in the second quarter as exports slid 21.4 per cent.
‘While the government is ensuring economic growth, we are also concerned about overcapacity in some industries,’ Xiong Bilin, deputy director of the National Development and Reform Commission’s industry department, said last Monday. The commission is China’s top economic planning agency.
China is curbing financing for projects in industries including steel, cement and aluminium.
In the next few months, the government will focus on balancing the need to maintain stable and relatively fast growth with the need to adjust the structure of China’s economy and better manager inflationary expectations, the State Council, China’s Cabinet, said last Wednesday.
The nation also faces increasing difficulty in managing liquidity and the structure of loans is ‘not rational’, the State Council said.
‘The global economic recover is still uncertain and unstable,’ Wang Huaqing, the disciplinary secretary of the China Banking Regulatory Commission, said at the financial forum in Shanghai over the weekend. The regulator ‘will continue prudent oversight and regulation of banks’, he said. -- Bloomberg
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China economy seen slowing next year
Bloomberg
26 October 2009
(SHANGHAI) China may face an economic slowdown in the middle of next year because the nation’s growth model is unsustainable, said Stephen Roach, chairman of Morgan Stanley Asia.
Economic growth in China accelerated to 8.9 per cent last quarter, fuelled by government stimulus spending and more than US$1 trillion of new bank lending. That rebound is causing complacency in China, which still faces ‘tough challenges in years ahead’, Mr. Roach said over the weekend at a financial forum in Shanghai.
‘China’s growth model is much more about supply than demand,’ Mr. Roach said. ‘It’s not a sustainable model for China. It’s not a sustainable model for any nation.’
The ‘imbalance’ created by China’s overdependence on exports for growth was compounded by the government’s efforts to bolster the world’s third-biggest economy as the global recession sapped demand for Chinese-made toys, clothes and electronics, Mr. Roach said.
China’s stimulus measures have also raised concerns about overcapacity and asset bubbles.
‘Macro imbalances are particularly acute right now,’ Mr. Roach said. ‘China’s economy risks slowdown again around mid-2010.’
China’s exports in September fell 15.2 per cent from a year earlier, the smallest decline in nine months. The nation has posted export declines for 11 consecutive months.
The government’s US$586 billion stimulus plan unveiled in November last year spans earthquake reconstruction work, roads, railways and low-cost housing. Chinese banks doled out a record 8.67 trillion yuan (S$1.77 trillion) of new loans in the first nine months, more than double the same period a year earlier.
That helped economic growth accelerate even as exports worsened. China grew 6.1 per cent in the first quarter of this year, the slowest pace of expansion in almost a decade, as shipments abroad fell 17.1 per cent during the period. Growth picked up to 7.9 per cent in the second quarter as exports slid 21.4 per cent.
‘While the government is ensuring economic growth, we are also concerned about overcapacity in some industries,’ Xiong Bilin, deputy director of the National Development and Reform Commission’s industry department, said last Monday. The commission is China’s top economic planning agency.
China is curbing financing for projects in industries including steel, cement and aluminium.
In the next few months, the government will focus on balancing the need to maintain stable and relatively fast growth with the need to adjust the structure of China’s economy and better manager inflationary expectations, the State Council, China’s Cabinet, said last Wednesday.
The nation also faces increasing difficulty in managing liquidity and the structure of loans is ‘not rational’, the State Council said.
‘The global economic recover is still uncertain and unstable,’ Wang Huaqing, the disciplinary secretary of the China Banking Regulatory Commission, said at the financial forum in Shanghai over the weekend. The regulator ‘will continue prudent oversight and regulation of banks’, he said. -- Bloomberg
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