Chinese Economy’s Double Digit Growth Boosts China Stocks
Reports Show China Expanding at the Fastest Annual Pace in Nearly 3 Years
About: Chinese economy, China stocks, Shanghai Composite Index, China ADR index, Bank of New York Mellon China ADR Index, China Business News, Consumer Price Index, Organization for Economic Cooperation and Development
Shares in Chinese companies are hitting new highs on optimism about China’s latest economic expansion figures. In Shanghai, Chinese shares rose again to a new three-month peak. The benchmark Shanghai Composite Index, which tracks both A and B shares, ended up 4.93 points, at 3166.18, its highest close since it ended at 3246 back in mid-January.
On U.S. stock exchanges, the China ADR index also continued to rise, hitting a one-year high. With a one-day increase of almost one percent, the Bank of New York Mellon China ADR Index topped the 404 level, and increase of almost 40 percent from last April’s low of 286.
The most recent gains in Chinese indexes are widely attributed to optimism about double-digit economic expansion in China’s first quarter. China Business News says first quarter growth will beat expectations, with a whopping increase of 11.9 percent. Reuters is reporting exactly the same Chinese growth figure, citing unnamed sources.
The reports show China expanding at the fastest annual pace in nearly three years.
These surprise growth reports from Beijing have beaten already-optimistic predictions by leading analysts. A survey of 24 economists by Bloomberg had produced a median growth estimate of 11.7 percent. Bloomberg expects that China’s robust growth rate will lead to a clampdown on credit and an upward revaluation of the yuan. But the positive reaction by stock markets on both sides of the Pacific clearly does not show anticipation of economic tightening by Beijing.
Instead, the latest figures appear to confirm a solid recovery from the lows of the global financial crisis a year ago, without signs of serious overheating. Exports jumped 28 percent in the first quarter of this year from the same period in 2009. Auto sales leapt 76 percent in the first quarter from a year ago.
A serious jump in inflation might trigger a tough credit crackdown by Beijing. But China’s main inflation gauge, likely rose 2.6% in March from a year earlier, a bit slower than February’s 2.7% rise, according to the economists polled in a the survey by Dow Jones.
That’s an inflation rate that Beijing can live with for the time being.
If the Consumer Price Index begins to accelerate towards five percent, investors can expect alarm bells to ring in Beijing. But the government’s recent decision to allow an increase in gas prices indicates the authorities are not yet moving in the direction of an economic clampdown.
The Organization for Economic Cooperation and Development says China will contribute fully one third of global growth this year if the nation’s economy continues to expand at this rate. International mining and resource stocks are also on the rise, indicating global anticipation that China will continue to import raw materials voraciously to fuel its expansion.
