15-03-2014, 09:20 AM
http://www.todayonline.com/chinaindia/ch...ment-slows
China stimulus decision looms as investment slows
Bank of America and at least five other institutions trim their expansion forecasts following this week’s data
PUBLISHED: MARCH 15, 4:12 AM
BEIJING — China’s weakest start to a year for investment growth since 2001 and unexpectedly slow industrial production are adding pressure for economic stimulus amid questions about the nation’s ability to achieve growth targets, just as Premier Li Keqiang signalled he wants to avoid such a move.
Mr Li, at his annual press briefing in Beijing on Thursday, indicated he was confident that economic goals for this year were within reach. Two hours later, data showed factory output rose in January and February from a year earlier by the least since the global financial crisis, while retail sales grew at the slowest rate for the period since 2004.
The figures increase chances that China will take steps to boost growth, including the first cut in almost two years to lenders’ reserve requirements, said Societe Generale. Any threat to jobs, incomes and the 7.5 per cent growth target could test the leadership’s resolve to curb pollution choking major cities, rein in shadow banking and control risks from a credit boom.
“They are serious about reforms and about protecting the growth target and particularly the employment part of that,” said Mr Tim Condon, Head of Asia Research at ING in Singapore, who previously worked for the World Bank. “We’re close to a decision point (on whether stimulus is needed),” he said.
A weakening in the yuan this year and declining interbank interest rates indicate the government is already trying to help the economy, said Bank of America, which along with at least five other institutions trimmed its China expansion forecasts following Thursday’s data.
China was able to realise last year’s economic targets without using short-term stimulus measures, Mr Li said on Thursday. “Why will we be unable to do so this year?” he asked.
Mr Ma Jiantang, head of the statistics bureau, said China’s economy is off to a good start for the year with major indexes at relatively high levels, reported an article in yesterday’s People’s Daily, the Communist Party newspaper. He said he is confident China can achieve this year’s targets and that employment in the first two months was good, said the paper.
The data released on Thursday showed fixed-asset investment rose 17.9 per cent in the first two months from a year earlier, compared with a 21.2 per cent pace in the same period last year. Factory-production growth of 8.6 per cent compared with a 9.7 per cent advance in December. Retail sales rose 11.8 per cent after increasing 13.6 per cent in December.
“This is a very fast deceleration,” said Mr Yao Wei, China economist at Societe Generale in Hong Kong, ranked the most accurate forecaster of China’s gross domestic product by Bloomberg. “This is really beyond the tolerance of the Chinese government. As a result, I think they will cut the required reserve ratio quite soon or do some easing.” Such a reduction could happen within a few days if the government wants to achieve 7.5 per cent expansion, he said.
While Mizuho Securities Asia — which also trimmed its expansion forecast yesterday — said a reserve-ratio cut is increasingly probable, ING’s Mr Condon said a reduction would send a “significant signal to the rest of the world that things were much worse in China than we had thought”.
“I just have the sense that they would not want to do that again,” Mr Condon said. Bloomberg
China stimulus decision looms as investment slows
Bank of America and at least five other institutions trim their expansion forecasts following this week’s data
PUBLISHED: MARCH 15, 4:12 AM
BEIJING — China’s weakest start to a year for investment growth since 2001 and unexpectedly slow industrial production are adding pressure for economic stimulus amid questions about the nation’s ability to achieve growth targets, just as Premier Li Keqiang signalled he wants to avoid such a move.
Mr Li, at his annual press briefing in Beijing on Thursday, indicated he was confident that economic goals for this year were within reach. Two hours later, data showed factory output rose in January and February from a year earlier by the least since the global financial crisis, while retail sales grew at the slowest rate for the period since 2004.
The figures increase chances that China will take steps to boost growth, including the first cut in almost two years to lenders’ reserve requirements, said Societe Generale. Any threat to jobs, incomes and the 7.5 per cent growth target could test the leadership’s resolve to curb pollution choking major cities, rein in shadow banking and control risks from a credit boom.
“They are serious about reforms and about protecting the growth target and particularly the employment part of that,” said Mr Tim Condon, Head of Asia Research at ING in Singapore, who previously worked for the World Bank. “We’re close to a decision point (on whether stimulus is needed),” he said.
A weakening in the yuan this year and declining interbank interest rates indicate the government is already trying to help the economy, said Bank of America, which along with at least five other institutions trimmed its China expansion forecasts following Thursday’s data.
China was able to realise last year’s economic targets without using short-term stimulus measures, Mr Li said on Thursday. “Why will we be unable to do so this year?” he asked.
Mr Ma Jiantang, head of the statistics bureau, said China’s economy is off to a good start for the year with major indexes at relatively high levels, reported an article in yesterday’s People’s Daily, the Communist Party newspaper. He said he is confident China can achieve this year’s targets and that employment in the first two months was good, said the paper.
The data released on Thursday showed fixed-asset investment rose 17.9 per cent in the first two months from a year earlier, compared with a 21.2 per cent pace in the same period last year. Factory-production growth of 8.6 per cent compared with a 9.7 per cent advance in December. Retail sales rose 11.8 per cent after increasing 13.6 per cent in December.
“This is a very fast deceleration,” said Mr Yao Wei, China economist at Societe Generale in Hong Kong, ranked the most accurate forecaster of China’s gross domestic product by Bloomberg. “This is really beyond the tolerance of the Chinese government. As a result, I think they will cut the required reserve ratio quite soon or do some easing.” Such a reduction could happen within a few days if the government wants to achieve 7.5 per cent expansion, he said.
While Mizuho Securities Asia — which also trimmed its expansion forecast yesterday — said a reserve-ratio cut is increasingly probable, ING’s Mr Condon said a reduction would send a “significant signal to the rest of the world that things were much worse in China than we had thought”.
“I just have the sense that they would not want to do that again,” Mr Condon said. Bloomberg