China Economy Growth To Exceed Original Predictions

About: China GDP growth, China State Council,  State Council Development Research Centre, State Information Centre, Shanghai Securities News, China Stock Digest, Chinese equities, Jim Trippon, China’s equity markets

Just last month Beijing made its predictions for economic expansion in 2010. The official target is 8 percent GDP growth. As usual, Chinese authorities are under-promising with an eye to over-delivering.

As we note in this month’s issue of the China Stock Digest, The World Bank estimates the China will deliver 9.5 percent growth over the course of the year. Deutsche Bank had the most optimistic projection we had seen to date with a prediction of 9.8 percent economic acceleration. It turns out, that’s still too low.

A prominent researcher working for the State Council (cabinet) says China will surpass all estimates with 12 percent growth in the first quarter. Yu Bin, head of macroeconomic research at the State Council Development Research Centre, made his comment in published remarks, as economists were ratcheting up growth forecasts in the wake of unexpectedly strong industrial output increases in the past two months. The fact that Yu’s words made their way into the popular press indicates that they were sanctioned by higher officials.

Yu tempered his booming outlook with a prediction that the Chinese economy would face relatively heavy downward pressure on the pace of growth in the second quarter, and for the rest of the year.

An article in the official Shanghai Securities News also quotes Fan Jianping, a senior economist with the State Information Centre, as forecasting 12 percent growth in the first quarter followed by a possible drop to 10.8% in the second quarter and 9% or less in the third and fourth quarters.

It appears that economists are predicting an easing of growth in later quarters of the year to prepare investors and businessmen for a pullback in government stimulus measures. Nevertheless, one of the big unknowns is the rate of recovery of the rest of the industrialized world and the effects this will have on Chinese exports.

So far, exports are bouncing back strongly. China’s latest industrial output data showed robust 20.7 percent year-over-year growth for January and February. Even if that can’t be maintained, it seems very likely that China is on track to exceed its 8 percent growth target for the year by a healthy margin. Economic expansion in the last quarter of 2009 was 10.7 percent, a roaring pace going into the current year and what’s expected to be a bang-up first quarter of 2010.