SUN
WUKONG Chinese economy down and looking
up By Wu Zhong, China editor
HONG KONG - There are reasons to be
cautiously optimistic about China's economic
outlook despite its gross domestic product (GDP)
growth slowing for a seventh straight quarter in
July-September.
The National Bureau of
Statistics (NBS) said last Thursday that China's
economy grew 7.4% in the third quarter, which was
lower than the 8.1% growth rate in the first
quarter and 7.6% in the second but still in line
with economists' forecasts. This is the slowest
quarterly growth since the 6.5% expansion in the
first quarter of 2009 amid the depth of the
international financial crisis.
"The GDP
grew 7.7% in the first three quarters and the economy
is generally stable," NBS
spokesman Sheng Laiyun told a press conference in
Beijing. China's GDP reached 35.35 trillion yuan
(US$5.3 trillion) in the first three quarters,
Sheng said.
China has lowered its growth
target for 2012 from a previous 8% to 7.5% amid
sluggish demand and global economic woes. "We are
fully confident that the economy will meet its
growth target of 7.5% this year," he said. His
optimism may well grounded.
Given the
stronger-than-expected domestic consumption during
the eight-day Mid-Autumn Festival and National Day
holiday from September 30 to October 7, China's
GDP growth in the fourth quarter is quite likely
to be faster than the third quarter. Hence
economic growth for the whole year will be higher
than 7.5% though lower than 8%.
Chinese
people made 660 million journeys during the
holiday period, up 8.8% from a year earlier. Of
the total, 424 million were pleasure trips, up 41%
from last year's golden-week National Day holiday,
which brought the country's tourism industry a
total income of 210.5 billion yuan (excluding
inter-city travels, retail sales and dining and
wining), up 44.4% from the previous year.
According to figures from the Ministry of
Commerce, during the eight days, retail sales
incomes of key retail stores and restaurants
(excluding small privately run shops and canteens)
across the country monitored by the ministry
reached 800.6 billion yuan, up 15% from a year
ago. Altogether, consumption on sight-seeing,
shopping and meals during the eight-day holiday
alone is already half of the total 2.25 trillion
yuan of such incomes during the three week-long
holidays (Chinese New Year, May Day and National
Day) in 2011.
China's railways transported
80.33 passengers during the holiday season, up
13.4% from last year, bringing 3.32 billion yuan
in business income, up 20%. China's airlines
carried 7.6 million passengers, up 27%, bringing
8.16 billion yuan in business income, up 25 % from
2011.
This year, the State Council ordered
all toll highways to waive their charges during
the eight-day autumn holiday to facilitate
do-it-yourself travel by car owners. It was
reported that the toll highways lost 20 billion
yuan in total, which meant many people traveled
with their own vehicles, and they had to spend on
oil, accommodation and food on their way. Official
figures showed that some 640 million journeys
during the holiday, out of the total 660 million,
were made on highways. So by comparison, the loss
of toll highways was negligible.
Like
elsewhere, direct consumption on tourism would
boost related domestic demand. All this certainly
will be factored into fourth quarter GDP growth.
As a result, the stronger-than-expected
consumption during the Moon Festival and National
Day holiday has boosted many Chinese economists'
confidence in economic outlook.
Particularly, as growth in investment and
export slows down, domestic consumption's
contribution to GDP growth is increasing.
According to a Ministry of Commerce report, in
2011 investment's contribution to China's GDP was
54.2%, consumption 51.6%, and export was a
negative 5.8%. This year, consumption's
contribution is expected to exceed 55%, becoming
the leading horse of the "troika" pulling the
Chinese economy.
NBS figures released on
Thursday also showed consumption has quickened,
with retail sales in September expanding by 14.2%
year-on-year, one percentage point higher than in
August and better than forecast by economists.
The fourth quarter usually is the busy
season for China's export of consumer goods to the
United States and European Union in advance of the
Christmas holiday. A slow improvement in the US
and EU economies, a new round of quantitative
easing in the US, and the launch of a permanent
bailout fund, the European Stability Mechanism, in
the EU may boost Christmas consumption in the
West. NBS data showed China's exports saw a
surprise surge in September, rising 9.9% to
US$186.35 billion, sharply up from 2.7% in August.
After NBS released the third-quarter data,
Liu Yuanchun, vice dean of Renmin University of
China's School of Economics, told Securities
Daily: "In view of the quarter-on-quarter growth
in the third quarter, the month of August seems to
be the bottom of this year's economic growth. The
economy has seemed to stabilize since September."
NBS said GDP grew 2.2% in July-September
from the second quarter.
Another reason to
be cautiously optimistic about China's economic
outlook lies in the expectation that Beijing may
launch new economic stimulus measures after the
transition to new leaders at the 18th party
congress to be held early in November. Measures
may include a further lowering of the reserve
requirement ratios for banks, interest rate cuts,
an export tariff reduction or increase in
investment. Such stimulus measures should and
could have been launched earlier, given the
current economic situation. But the Communist
Party apparently wants to let the new leadership
take credit for such moves.
In the Chinese
tradition, it is important for newly appointed
officials to do something after taking office to
establish authority and show efficiency. In common
folks' words, some "fireworks" will be displayed
to celebrate the "successful convention" of the
18th party congress and the birth of a new
leadership.
A subtle change in Premier Wen
Jiabao's view on economic outlook could be a third
reason to be cautiously optimistic.
In
early July, during an inspection trip to Jiangsu
province, Wen sounded somewhat pessimistic: "At
present, generally speaking, China's economic
performance is stable. But the downturn pressure
remains relatively heavy."
Two months
later, he told the World Economic Forum 2012
Summer Davos in Tianjin: "China's economic growth
... shows the trend of stabilization amid
slowdown."
Last Wednesday, the Chinese
premier said in Beijing: "The economic situation
in the third quarter should be said to be quite
good. Now we can confidently say China's economic
growth now tends to be stabilizing, as some
positive changes are taking place."
Surely, Wen's growing confidence does not
come out of thin air. As "managing director" of
the economy, the premier must have been cheered up
by the economic performance in the third quarter,
or had something up his sleeve that he thinks
could give the economy a spur.
China's
inflation eased to 1.9% in September from 2% in
August. Despite the lessened pressure, Sheng said
the country should continue to be wary, warning of
imported inflation likely to be caused by QE3 and
loose monetary policies in the yen and euro
regions, according to Xinhua News Agency.
"We are seeing positive factors that will
drive a rebound for the economy," Tang Jianwei,
senior finance analyst at the Bank of
Communications, was quoted by Xinhua as saying.
Tang said a rise in people's disposable
incomes and a stable employment situation further
paved the way for recovery, which will be boosted
by more consumption and a faster pace of
investment following an upcoming leadership
transition.
NBS data showed that China
created 10.24 million new jobs in the first
quarter, exceeding the annual target of ten
million. During the same period, the disposable
incomes of urban residents rose 9.8%, while those
of rural residents grew 12.3%.
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