Wandering China

An East/West pulse of China's fourth rise from down under.

Wen Warns China’s Economic Recovery Yet To Show Momentum [Bloomberg]


I suppose the bearish are usually out in full force when news of Chinese slowdown hit the headlines. Restructuring however, seems eminent as China attempts to sort out its domestic challenges with its banking and property sectors to cautiously prevent a hard landing as many naysayers have been predicting.

For more, Here’s What China’s Slowdown Means For The Rest Of The World (Business Insider) which states, ‘The impact of lower Chinese demand could fall hardest on Asian economies that supply industrial components to its vast manufacturing industry, as well as exporters of oil, iron ore and other commodities such as Australia and African nations. Chinese imports of steel, copper and oil have declined by volume over a year ago.’

– – –

Wen Warns China’s Economic Recovery Yet To Show Momentum
Source – Bloomberg, published July 16, 2012

China’s Premier Wen Jiabao warned the momentum for a recovery in economic growth isn’t yet in place and that “difficulties” may persist for a while, the official Xinhua News Agency reported.

Even so, the current pace of economic expansion is within the targeted range and government measures to stabilize growth are “bearing fruit,” the premier said during an inspection tour in southwest Sichuan province, according to a Chinese- language report from Xinhua yesterday. The article didn’t mention government policies toward the property market.

Wen’s comments follow data that showed Asia’s largest economy had the weakest expansion in three years as Europe’s fiscal crisis sapped exports and a crackdown on property speculation curbed domestic demand. At the same time, a recovery in home sales and a jump in investment signaled lower interest rates and banks’ reserve requirements may be starting to arrest the slowdown.

“It should be clearly understood that the momentum for a stable rebound in the economy has not yet been established,” Xinhua cited Wen as saying. “We need to comprehensively assess the situation and recognize the problems, difficulties and risks, in particular the downward pressure on the economy,” Wen said.

The government will step up policy fine-tuning in the second half to support growth, he said, reiterating comments he made during a visit to eastern Jiangsu province earlier this month.

Weakest Pace

China’s gross domestic product rose 7.6 percent in the second quarter from a year earlier, the statistics bureau said on July 13, the sixth straight slowdown. Industrial production increased at a more moderate pace in June while retail sales growth decelerated, the data showed.

Nomura Holdings Inc. cut its China growth forecasts after the data. The bank now estimates expansion of 8.2 percent this year rather than 8.4 percent, and a pace of 7.9 percent in 2013, down from an earlier prediction of 8.2 percent.

Wen in March set a 2012 growth goal of 7.5 percent, down from an 8 percent target in place since 2005.

Separately on July 13, the People’s Bank of China said weak global demand will hinder growth, with the world situation “extremely” complicated, according to the central bank’s 2012 financial-stability report.

Property Controls

The PBOC announced the second cut in interest rates in a month on July 5 and has reduced banks’ reserve requirement ratio three times starting in November.

During his visit to Jiangsu, Wen pledged to “unswervingly” sustain property controls and prevent a rebound in prices. Yesterday’s report on the premier’s tour in Sichuan from July 13 to 15 didn’t contain any reference to the real- estate market or property prices.

At an economic forum in Chengdu on July 14 with officials from five central and western provinces, Wen said the “fundamentals for economic development remain sound” and that “many bright spots are emerging in the course of development,” according to Xinhua. “The drivers and potential for economic growth are still relatively large,” he said.

The “bumper harvest” over the summer has provided a solid foundation for stable economic growth, helping to stabilize prices, Wen said. The monthly deceleration in prices “gives the government more scope for macro-economic controls,” he said.

Inflation eased to 2.2 percent in June from a year earlier, the lowest rate in 29 months, while producer prices fell for the fourth month, government reports on July 9 showed.

China “must do everything possible” to expand jobs, paying particular attention to the employment of college graduates, Wen said, according to Xinhua.

The government will pay more attention to encouraging growth of private enterprises and provide financial and tax support, Wen said, although he pointed out that companies must also help themselves by innovating and upgrading their products.

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Filed under: Beijing Consensus, Bloomberg, Chinese Model, Domestic Growth, Economics, Government & Policy, Influence, New Leadership, Strategy, Tao Guang Yang Hui (韬光养晦), The Chinese Identity, Trade, , ,

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