HONG KONG: China yesterday reported a batch of solid economic data for July, two major Asian central banks kept interest rates unchanged and business confidence rose to a two-year high in Australia - all news that showed the region is continuing its slow and onerous climb out of recession.
China has withstood the global economic turmoil better than most other countries, thanks to aggressive stimulus measures announced by Beijing last year, and in recent months it has frequently surprised even optimistic economic analysts with buoyant investment, spending and production data.
Data for July, released yesterday, showed industrial output, a key measure of wider economic growth, rose 10.8 per cent from a year earlier, at a slightly higher pace than in June. Retail sales rose 15.2 per cent.
Trade data published separately showed exports in July dropped 23 per cent from a year earlier, a slightly smaller decline than economists had expected.
The data cemented the view that the China's giant economy is ploughing ahead steadily as government spending and a massive increase in lending by state-controlled banks during the first half of this year helped offset the negative fallout from collapsing demand for Chinese-made products in the United States and in Europe.
Reflecting growing optimism that the government's tremendous leeway to stimulate growth has put China on a path to solid recovery, economists at Goldman Sachs on Monday raised their forecast for the country's full-year growth this year to 9.4 per cent. This is up from the 8.3 per cent they had previously projected, and higher than the government's target of 8 per cent. For 2010, the Goldman Sachs economists expect the Chinese economy to expand 11.9 per cent.
However, the pace of growth - and of exports in particular - remains significantly below where it was before the global economic crisis began to hit export- dependent Asia late last year.
China's industry and retail data released yesterday, while good, was slightly lower than most economists had projected, and underlined that the economy remains hugely dependent on government spending programmes and bank lending to sustain growth. And the export decline was the ninth such fall in a row, showing that depressed exports are likely to remain a major drag on the economy for some time to come.
At the same time, a spike in stock markets and property prices in China has led many to worry that another bubble is in the making. The authorities now face the challenging balancing act of scaling back the pace of bank lending in a bid to deflate price spikes - but doing so without choking off economic growth.
Chinese stocks yesterday rose 0.46 per cent, ending a four-session losing streak, as economists said the country's economic recovery still appeared intact after mixed economic data for July.
Turnover shrank sharply, however, as sentiment remained cautious after the recent pull-back spurred in part by concerns about tightening market liquidity that were confirmed by a sharp fall in new bank lending data for July.
A drop in new loans, to 356 billion yuan (S$75 billion) in July from 1.53 trillion yuan in June, was largely due to arm-twisting by the central bank, said Mr Paul Cavey, an economist at Macquarie Securities in Hong Kong.
But he said no real monetary tightening was under way because policymakers were waiting for proof of a full recovery.
Elsewhere in the region, the Bank of Japan policy board members voted unanimously to hold interest rates at 0.1 per cent, as widely expected, and South Korea kept its key interest rate unchanged at a record low of 2 per cent for the sixth month in a row as the nascent recovery there takes root.
In Australia, a key measure of business confidence jumped to its highest level in almost two years in July, adding to signs that its economy is rebounding.
NEW YORK TIMES, REUTERS
Source: Straits Times, 12 Aug 2009