By John Garnaut
CHINESE investors are punting on an imminent economic recovery, with the Chinese Government underscoring its relative financial strength by pledging $US25 billion ($35 billion) in new funds and loans to South-East Asia.
Investors pushed the Shanghai Composite Index up 2.7 per cent late yesterday and 38 per cent so far this year, breaching the 2500 mark for the first time since August. The market was buoyed after the Premier, Wen Jiabao, revealed in a newspaper interview that industrial production had risen 8.3 per cent in the year to March. Steel and resources company shares were up strongly. Commodity importers were also anticipating a pick-up in underlying steel consumption, with iron ore stockpiles in the 20 major ports up 12 per cent to 66.9 million tonnes in the month to yesterday, according calculations by Steel Business Briefing.
"This is reflecting the crazy amount of iron ore imports we've seen in the last few months," the China editor of Steel Business Briefing, Paul Bartholomew, said.
"All of this stimulus money is starting to have an impact on construction volumes and therefore demand for machinery and raw materials," Arthur Kroeber, principal of the Beijing consultancy Dragonomics, said.
"Pretty much every Asian economy is seeing a significant rebound in its export growth based on sales to China," he said.
China stands alone among the major economies in boasting strong government, banking, corporate and household balance sheets despite the global financial crisis.
In recent weeks the Chinese Government has deployed its relative financial strength to help stabilise other nations, particularly its neighbours.
According to the Foreign Minister, Yang Jiechi, Mr Wen was ready to announce $US15 billion in credit facilities at the summit of ASEAN leaders before it was cancelled when protesters occupied the venue.
Almost all sectors of the Chinese economy appear to have bottomed out since the export shock and construction slump of late last year. Most of the new activity appears to flow directly from the Government's all-out fiscal and monetary stimulus effort.