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China returns to growth trajectory

Post Time:Jul 21,2009Classify:Industry NewsView:277

China's economic comeback is under way, towing along companies from Intel Corporation to Hyundai Motor and starting to make up for weak demand in other major economies.

The world's third-largest economy grew 7.9 percent in the second quarter from a year earlier, after expanding at the slowest pace in almost a decade in the previous three months, the statistics bureau said yesterday.

The first acceleration in growth in more than two years came after the government implemented a 4 trillion yuan (R4.8 trillion) stimulus plan and prodded banks to lend more.

China is the only one of the 10 biggest economies that is expanding, highlighting the role the nation may play in easing the worst global recession since the Great Depression. The US economy is still shrinking, five months after the Congress agreed to President Barack Obama's $787 billion (R6.4 trillion) stimulus package.

"China cannot save the world by itself, but its recovery is a definite positive," said Brian Jackson, a strategist at Royal Bank of Canada in Hong Kong.

"China has a lot more control over how its banks do business and they were in a lot stronger position than US banks to implement policy stimulus."

The Chinese economy will expand 8.1 percent this year, according to the median forecast of 16 Bloomberg economists, after the government released the second-quarter figure.

Growth will accelerate to 9.1 percent next year, they estimated. The pick-up, driven by tax cuts and government-funded incentives to encourage consumers to buy cars and electronics goods, is bolstering demand for imports.

Intel says consumers in Asia, especially China, are leading a recovery in demand for personal computers. The Santa Clara, California-based company's sales in the Asia-Pacific region rose 21 percent to $4.41bn in the past quarter, while sales in the Americas and Europe plunged.

"We are seeing Asia-Pacific stronger than the rest of the world; in particular, consumption in China looks very good," said Stacy Smith, Intel's chief financial office. "Mature markets are lagging a little bit behind."

Seoul-based Hyundai's sales in China surged 56 percent from a year earlier to 257 003 units in the first half, making the country its biggest and fastest growing overseas market.

Sales by South Korea's largest car maker in the US, which used to be its biggest market, dropped 11 percent to 204 686 units, according to the company.

Government-influenced spending is driving more than four-fifths of China's expansion, according to the World Bank. Urban fixed-asset investment surged 33.6 percent in the first half, the fastest growth in five years. Industrial production increased 10.7 percent last month from a year earlier, the largest gain in nine months.
"China's recovery is major positive news, especially for commodities exporters," said Wang Tao, an economist with UBS in Beijing. "The strongest factor in China's recovery is investment demand, which means it will import more commodities and machinery."

Chinese imports of copper and its products jumped to a record last month, increasing 13 percent from the previous month. Iron ore imports rose 3.4 percent last month to the second-highest level this year, as rising prices prompted steel makers to produce more and buy more raw materials.

The Chinese government unveiled its stimulus package in November, four months before Obama's measures were approved. The stimulus has boosted sales for construction equipment maker Komatsu, while subsidies to encourage consumer spending have boosted sales for manufacturers such as Tokyo-based Nissan Motor and plastics maker Teijin in Osaka.

Tokyo-based Komatsu, the world's second-biggest maker of earthmovers, said last month that its sales in China probably beat expectations in the quarter to June. The company expects the market to grow to about 15 percent of total sales this business year, compared with 10 percent last year.

AU Optronics Corporation and Chi Mei Optoelectronics, Taiwan's two biggest liquid-crystal display makers, said that they expect third-quarter sales to rise from the previous three-month period, because there is a global shortage of glass, while demand from China is strengthening.

Last month, China's television makers said they planned to purchase $4.4bn of flat panel products from Taiwan this year, doubling their December forecast.

"What you're seeing happening in emerging Asia, not just China, is encouraging," US Treasury Secretary Timothy Geithner said. "It provides some basis for cautious optimism that we're going to start to come out of this over the next few quarters."

Federal Reserve chairman Ben Bernanke will brief Chinese officials at a summit this month about how the US plans to keep inflation in check over the next few years, according to people advised on the plans.

David Loevinger, a US Treasury official co-ordinating the meeting, said in Washington this week that the current government was enlisting Bernanke to try to assuage Chinese concerns about long-term US economic health, people at the meeting said on condition of anonymity.

China increased its holdings to $801.5bn billion in May.

It's still too much to hope that China can rally the world, given that its stimulus has been focused on bolstering demand at home, said Robert Carnell, the chief international economist at ING Financial Markets.

"There will be some economies that benefit on the sidelines, but that's not going to help the average Joe on a street in America," Carnell said."

Source: http://www.busrep.co.zaAuthor: shangyi

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