China Growing 9.5% Evident as New Vehicle Sales Soar (Update1)
2009-09-09 05:10:06.636 GMT
(Updates stock market in fifth paragraph.)
By Bloomberg News
Sept. 9 (Bloomberg) -- Look no further than Alcoa Inc. and
General Motors Co. for evidence that the Chinese economy is
poised to accelerate even after a slump in lending growth
dragged down the nation's stock market.
Alcoa, the largest U.S. aluminum producer, is raising its
forecast for global consumption of the metal on stronger demand
from China. GM, the biggest overseas automaker in China, says
the nation's vehicle sales may reach 12 million, surpassing the
U.S. as the world's No. 1 market.
The benchmark Shanghai Composite Index entered a bear
market, or a decline of at least 20 percent, Aug. 31 on concern
a slide in new loans in July might slow production and
investment. Figures for August may allay the fears: Industrial
output rose the most in a year and retail sales climbed at a 15
percent annual pace, median forecasts in Bloomberg News surveys
show.
"Credit tightening isn't going to crash the economy,"
said Tim Condon, head of Asia research in Singapore at ING Groep
NV and a former economist at the World Bank. "It's taking
investors a little time to get their heads around this fact."
The Shanghai index rose for a sixth day yesterday, helping
pare the decline from this year's record close on Aug. 4 to 16
percent. The measure fell 0.3 percent as of 1:04 p.m. today.
'On Track'
A boom in lending earlier this year will be enough to
sustain a pick-up in the country's economic expansion, analysts
said. China's gross domestic product may increase 9.5 percent in
2010 after an 8.3 percent gain in 2009, the smallest in eight
years, according to a Bloomberg survey of 22 economists
conducted the week ending Aug. 28.
"China's economic recovery is well on track," said Lu
Zhengwei, an economist in Shanghai at Fuzhou-based Industrial
Bank Co., China's seventh-largest bank by market value. "With
the explosion of loans so far, stimulus investment won't be
affected, even if lending declines for the rest of this year."
August new-lending figures are scheduled to be released
Sept. 11 and may show a 10 percent decline to 320 billion yuan
($47 billion), according to the median estimate of nine analysts
surveyed by Bloomberg. The July total was less than 25 percent
of the June figure.
Loans reached a record 7.7 trillion yuan in the first half
of the year, spurring concern among Chinese policy makers that a
credit boom would stoke speculation in assets such as stocks and
property.
While credit growth is slowing, some industries are
continuing to obtain financing, helping ease any impact on the
nation's manufacturing, analysts said.
Ample Funding
Loans of more than a year, used for projects such as
railways and power-generation plants, showed ample funding, said
Wang Tao, an economist in Beijing at Zurich-based UBS AG,
Switzerland's largest bank by assets. Short-term credit, more
likely to be used for speculative purposes, dropped, she added.
Industrial production, due for release on Sept. 11, rose at
an 11.8 percent annual rate in August, after a 10.8 percent
increase in July, according to the median of 15 estimates in a
Bloomberg survey. Retail sales figures the same day may show a
15.3 percent gain in August from a year earlier, the biggest
rise since January, economists' estimates indicate.
To maintain the momentum, the central government has
budgeted 487.5 billion yuan of stimulus spending this year and
another 588.5 billion yuan in 2010 for work on projects from
low-cost housing to reconstruction in Sichuan province, hit by a
7.9-magnitude earthquake in May 2008.
Rising Demand
All this means more business for Chinese and international
companies. Alcoa expects China's consumption of aluminum to rise
4 percent this year, compared with its earlier prediction of
zero growth, because of demand triggered by stimulus spending,
Chief Executive Officer Klaus Kleinfeld said in a Sept. 3
interview.
GM sales in China last month jumped to 152,365 vehicles, a
gain of more than 100 percent, as tax cuts and stimulus measures
spurred demand. The Detroit-based company said its 2009 sales
will rise more than 40 percent from 1.09 million last year.
The total for all automakers may increase 28 percent this
year to as many as 12 million, China's top planning agency said
Sept. 5.
Auto production accounts for about 2 percent of GDP and
aluminum output for about 0.5 percent, according to estimates
by David Cohen, an economist in Singapore at Action Economics.
China Railway Construction Corp., the builder of more than
half the nation's railroads, saw first-half profit jump 46
percent to 2.2 billion yuan, bolstered by government spending.
'Definitely Exceed'
"We are the beneficiary of a once-in-a-hundred-years
opportunity," Vice Chairman Ding Yuanchen told reporters Sept.
2 in Hong Kong. The company "will definitely exceed" its sales
target of 266.3 billion yuan this year, he added.
Manufacturing expanded the most in 16 months in August,
driven by the record lending in the first half of the year, the
official Purchasing Managers' Index showed Sept. 1. Urban
investment in fixed assets such as factories and properties
surged 32.7 percent in the first eight months of 2009 from a
year earlier, according to the median estimate of 15 economists
surveyed by Bloomberg.
China is also likely to benefit from a recovery in global
trade, which the World Bank expects will record the first
contraction since 1982 this year. Chinese exports may climb as
much as 15 percent in 2010 after shrinking this year, said Peter
Redward, head of Asian emerging-markets research in Singapore at
Barclays Plc, the U.K.'s second-biggest lender.
Import Demand
Trade figures this week may show that China's imports, the
world's third-largest, fell 10.5 percent in August from a year
earlier, the least in 10 months, according to the Bloomberg
survey median.
Excess capacity in a number of industries remains a drag on
the nation's growth for now.
Li Yizhong, China's industry minister, ordered steel
companies on Aug. 13 to refrain from expansion for the next
three years. Mills can produce 660 million metric tons of steel
annually and there's demand for only 470 million tons, Li said.
Industrial profits dropped 17.3 percent in the first seven
months of 2009 from a year earlier to 1.11 trillion yuan,
according to the National Statistics Bureau.
"Despite a more self-evident economic turnaround in China,
the prospect for the world economy remains unclear and the
downside risk to external demand remains significant," the
Commerce Ministry said last month.
China still has ample resources to maintain its economic
acceleration, analysts said. The nation has the world's largest
foreign-exchange reserves, at $2.1 trillion, and outstanding
government debt of only 20 percent of GDP, compared with 87
percent in India, according to the International Monetary Fund.
"The government will do whatever it takes to keep growth
going," said Huang Yiping, an economics professor at Beijing
University and the former chief Asia Pacific economist at
Citigroup Inc., the third-largest U.S. bank.
For Related News and Information:
China economic calendar: ECO CH <GO>
China economic snapshot: ESNP CH <GO>
China's manufacturing: TNI CHINA MAC <GO>
China's trade balance: CNFTBL <INDEX> GP <GO>
Chinese company earnings: TNI CHINA ERN BN <GO>
Most-read stories on China: MNI CHINA 1W <GO>
Most-read China economy stories: TNI CHECO MOSTREAD BN
<GO>
Top economic news: TOP ECO <GO>
--With assistance from Kevin Hamlin and Li Yanping in
Beijing. Editors: Paul Panckhurst, Matthew Brooker
To contact the Bloomberg News staff on this story:
Kevin Hamlin in Beijing on +86-10-6649-7573 or
khamlin@bloomberg.net
To contact the editor responsible for this story:
Michael Dwyer at +65-6212-1130 or
mdwyer5@bloomberg.net
2009-09-09 05:10:06.636 GMT
(Updates stock market in fifth paragraph.)
By Bloomberg News
Sept. 9 (Bloomberg) -- Look no further than Alcoa Inc. and
General Motors Co. for evidence that the Chinese economy is
poised to accelerate even after a slump in lending growth
dragged down the nation's stock market.
Alcoa, the largest U.S. aluminum producer, is raising its
forecast for global consumption of the metal on stronger demand
from China. GM, the biggest overseas automaker in China, says
the nation's vehicle sales may reach 12 million, surpassing the
U.S. as the world's No. 1 market.
The benchmark Shanghai Composite Index entered a bear
market, or a decline of at least 20 percent, Aug. 31 on concern
a slide in new loans in July might slow production and
investment. Figures for August may allay the fears: Industrial
output rose the most in a year and retail sales climbed at a 15
percent annual pace, median forecasts in Bloomberg News surveys
show.
"Credit tightening isn't going to crash the economy,"
said Tim Condon, head of Asia research in Singapore at ING Groep
NV and a former economist at the World Bank. "It's taking
investors a little time to get their heads around this fact."
The Shanghai index rose for a sixth day yesterday, helping
pare the decline from this year's record close on Aug. 4 to 16
percent. The measure fell 0.3 percent as of 1:04 p.m. today.
'On Track'
A boom in lending earlier this year will be enough to
sustain a pick-up in the country's economic expansion, analysts
said. China's gross domestic product may increase 9.5 percent in
2010 after an 8.3 percent gain in 2009, the smallest in eight
years, according to a Bloomberg survey of 22 economists
conducted the week ending Aug. 28.
"China's economic recovery is well on track," said Lu
Zhengwei, an economist in Shanghai at Fuzhou-based Industrial
Bank Co., China's seventh-largest bank by market value. "With
the explosion of loans so far, stimulus investment won't be
affected, even if lending declines for the rest of this year."
August new-lending figures are scheduled to be released
Sept. 11 and may show a 10 percent decline to 320 billion yuan
($47 billion), according to the median estimate of nine analysts
surveyed by Bloomberg. The July total was less than 25 percent
of the June figure.
Loans reached a record 7.7 trillion yuan in the first half
of the year, spurring concern among Chinese policy makers that a
credit boom would stoke speculation in assets such as stocks and
property.
While credit growth is slowing, some industries are
continuing to obtain financing, helping ease any impact on the
nation's manufacturing, analysts said.
Ample Funding
Loans of more than a year, used for projects such as
railways and power-generation plants, showed ample funding, said
Wang Tao, an economist in Beijing at Zurich-based UBS AG,
Switzerland's largest bank by assets. Short-term credit, more
likely to be used for speculative purposes, dropped, she added.
Industrial production, due for release on Sept. 11, rose at
an 11.8 percent annual rate in August, after a 10.8 percent
increase in July, according to the median of 15 estimates in a
Bloomberg survey. Retail sales figures the same day may show a
15.3 percent gain in August from a year earlier, the biggest
rise since January, economists' estimates indicate.
To maintain the momentum, the central government has
budgeted 487.5 billion yuan of stimulus spending this year and
another 588.5 billion yuan in 2010 for work on projects from
low-cost housing to reconstruction in Sichuan province, hit by a
7.9-magnitude earthquake in May 2008.
Rising Demand
All this means more business for Chinese and international
companies. Alcoa expects China's consumption of aluminum to rise
4 percent this year, compared with its earlier prediction of
zero growth, because of demand triggered by stimulus spending,
Chief Executive Officer Klaus Kleinfeld said in a Sept. 3
interview.
GM sales in China last month jumped to 152,365 vehicles, a
gain of more than 100 percent, as tax cuts and stimulus measures
spurred demand. The Detroit-based company said its 2009 sales
will rise more than 40 percent from 1.09 million last year.
The total for all automakers may increase 28 percent this
year to as many as 12 million, China's top planning agency said
Sept. 5.
Auto production accounts for about 2 percent of GDP and
aluminum output for about 0.5 percent, according to estimates
by David Cohen, an economist in Singapore at Action Economics.
China Railway Construction Corp., the builder of more than
half the nation's railroads, saw first-half profit jump 46
percent to 2.2 billion yuan, bolstered by government spending.
'Definitely Exceed'
"We are the beneficiary of a once-in-a-hundred-years
opportunity," Vice Chairman Ding Yuanchen told reporters Sept.
2 in Hong Kong. The company "will definitely exceed" its sales
target of 266.3 billion yuan this year, he added.
Manufacturing expanded the most in 16 months in August,
driven by the record lending in the first half of the year, the
official Purchasing Managers' Index showed Sept. 1. Urban
investment in fixed assets such as factories and properties
surged 32.7 percent in the first eight months of 2009 from a
year earlier, according to the median estimate of 15 economists
surveyed by Bloomberg.
China is also likely to benefit from a recovery in global
trade, which the World Bank expects will record the first
contraction since 1982 this year. Chinese exports may climb as
much as 15 percent in 2010 after shrinking this year, said Peter
Redward, head of Asian emerging-markets research in Singapore at
Barclays Plc, the U.K.'s second-biggest lender.
Import Demand
Trade figures this week may show that China's imports, the
world's third-largest, fell 10.5 percent in August from a year
earlier, the least in 10 months, according to the Bloomberg
survey median.
Excess capacity in a number of industries remains a drag on
the nation's growth for now.
Li Yizhong, China's industry minister, ordered steel
companies on Aug. 13 to refrain from expansion for the next
three years. Mills can produce 660 million metric tons of steel
annually and there's demand for only 470 million tons, Li said.
Industrial profits dropped 17.3 percent in the first seven
months of 2009 from a year earlier to 1.11 trillion yuan,
according to the National Statistics Bureau.
"Despite a more self-evident economic turnaround in China,
the prospect for the world economy remains unclear and the
downside risk to external demand remains significant," the
Commerce Ministry said last month.
China still has ample resources to maintain its economic
acceleration, analysts said. The nation has the world's largest
foreign-exchange reserves, at $2.1 trillion, and outstanding
government debt of only 20 percent of GDP, compared with 87
percent in India, according to the International Monetary Fund.
"The government will do whatever it takes to keep growth
going," said Huang Yiping, an economics professor at Beijing
University and the former chief Asia Pacific economist at
Citigroup Inc., the third-largest U.S. bank.
For Related News and Information:
China economic calendar: ECO CH <GO>
China economic snapshot: ESNP CH <GO>
China's manufacturing: TNI CHINA MAC <GO>
China's trade balance: CNFTBL <INDEX> GP <GO>
Chinese company earnings: TNI CHINA ERN BN <GO>
Most-read stories on China: MNI CHINA 1W <GO>
Most-read China economy stories: TNI CHECO MOSTREAD BN
<GO>
Top economic news: TOP ECO <GO>
--With assistance from Kevin Hamlin and Li Yanping in
Beijing. Editors: Paul Panckhurst, Matthew Brooker
To contact the Bloomberg News staff on this story:
Kevin Hamlin in Beijing on +86-10-6649-7573 or
khamlin@bloomberg.net
To contact the editor responsible for this story:
Michael Dwyer at +65-6212-1130 or
mdwyer5@bloomberg.net
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