No hard landing for China as GDP rebounds
Chinese economic activity rose in the December quarter and housing picked up, new data shows. Photo: Michele Mossop
China's economic growth accelerated for the first time in two years, with industrial output picking up, after the government implemented policies to revive domestic demand as export growth slumped.
Gross domestic product rose 7.9 per cent in the fourth quarter from a year earlier, the National Bureau of Statistics said in Beijing today. That compared with the 7.8 per cent median estimate in a Bloomberg News survey and 7.4 per cent in the previous period. Industrial output in December rose a more-than- expected 10.3 per cent and fixed-asset investment for the year gained 20.6 per cent.
The rebound may gather pace in the first half as infrastructure projects are rolled out and the housing market picks up, a boost for new leaders who are set to take office in March. Incoming Premier Li Keqiang may face a tougher second half as stimulus effects fade, a likely acceleration in inflation encourages monetary tightening and regulators grapple with shadow-banking risks.
"China is in a cyclical recovery and we can see that the recovery will continue into the first and second quarters, but what happens after that is quite uncertain," Yao Wei, China economist with Societe Generale SA, said before the report. "What happens to the property market is the biggest upside and downside risk, while the rise in non-bank financing may lead regulators to tighten -- we can't simply assume policy will get easier from now on."
Hong Kong-based Yao, ranked by Bloomberg as the most accurate forecaster for quarterly GDP, had forecast 7.9 per cent for the quarter. She raised her estimate for expansion in the first three months of 2013 to 8.2 per cent from 7.8 per cent and for the second quarter to 7.9 per cent from 7.5 per cent, according to a note released yesterday. She expects momentum to fade in the second half, with growth slowing to 7.4 per cent in the fourth quarter.
The economy expanded 7.8 per cent for the full year, the least in 13 years, according to statistics bureau data, compared with the 7.7 per cent median estimate in a Bloomberg survey of 32 economists. Growth may pick up to 8.1 per cent this year, according to analysts polled by Bloomberg in December.
Outgoing Premier Wen Jiabao set a 2012 target of 7.5 per cent in March, the lowest goal since 2004. The government will keep the target at 7.5 per cent this year, Bloomberg News reported on Dec. 18, citing two bank executives and a regulatory official briefed on the matter.
Improving investor confidence in China's outlook has lifted mainland stocks and the currency. The Shanghai Composite Index, the nation's benchmark gauge, has advanced 17 per cent as of yesterday from an almost four-year low on Dec. 3. It was 0.7 per cent higher at 10:02 a.m. local time today.
The yuan has appreciated 0.23 per cent against the dollar this year as of yesterday, the best start since 2009, on signs China's growth is accelerating. The currency touched 6.2124 per dollar on Jan. 14, the strongest level since the government unified the official and market exchange rates at the end of 1993.
The increase in industrial production compared with the 10.2 per cent median forecast in a Bloomberg survey of 44 analysts and was the fastest pace since March. Retail sales climbed 15.2 per cent from a year earlier, compared with the median analyst estimate of 15.1 per cent and a 14.9 per cent increase the previous month.
Fixed-asset investment excluding rural households for the January-to-December period compared with a 20.7 per cent gain in the first 11 months of the year.
The central bank has paused from its monetary easing since July after two interest-rate cuts and three reductions in lenders' reserve requirements starting in November 2011. At the same time, the government has accelerated investment-project approvals, trimmed fees for exporters and increased spending on infrastructure.
The investment is helping companies including China Railway Group Ltd., which said this week that it won 11 contracts valued at 29.8 billion yuan ($US4.8 billion) to build urban railways, bridges and other infrastructure.
The growth rebound may support China's new leadership headed by Xi Jinping as it tries to balance the need to create jobs and maintain social stability with a pledge to overhaul the economy and spread the benefits of the nation's growth more equally. Xi and Communist Party No. 2 Li Keqiang, set to become premier in March, have signaled a shift in priorities for the world's second-biggest economy that will entail higher "quality and efficiency" of expansion.
The cost of average annual expansion of more than 10 per cent over the past decade was exposed this month when smog engulfed a swath of northern China, including the capital, Beijing, prompting calls from official media for government action to improve the environment.
Li called for the nation's citizens to have patience as authorities work to reduce pollution and said that "solving this problem will also be a long-term process."