Thursday, October 22, 2009

Another Economics Post

China's had two very strong quarters of growth.

From The Wall St. Journal:

BEIJING—China's recovery is becoming broader and potentially more sustainable, a shift that could provide better support for a still-fragile global economy. Reinforcing those signs is a change of tone from China's cautious government, which is now becoming more confident in a solid rebound.

Economic data released Thursday showed China's gross domestic product growing by 8.9% from a year earlier in the third quarter, following the 7.9% gain in the second quarter. The expansion in industrial output, the backbone of the manufacturing-heavy economy, accelerated further to 13.9% in September from 12.3% in August.

Just as important is evidence that improvements in the economy are achieving a momentum that's no longer totally dependent on the government's massive stimulus program. The key shift in the latest quarter: a turnaround in the financial health of Chinese companies.

"Orders are piling up on our end. Now my headache is how to get our production to catch up," said Su Qisen, vice president of Xiangxing Bag & Luggage Group, located in southeastern Fujian province. Export orders started to rebound around June, he said, but Chinese consumers are also proving more willing to spend on the company's purses, suitcases and backpacks. "The domestic sales are doing especially well, especially our own brand," Mr. Su said.

He plans to hire 4,000 to 5,000 more employees in the next few months to work on 10 new assembly lines, up from around 10,000 workers now. To attract workers in an increasingly competitive labor market, Mr. Su said he is also planning to raise wages by 10% to 15%.

Read On
Things are looking up for China. The article goes on to say that the increased lending that fueled China's growth earlier this year have slowed. But some are still worried that even the slowed rate is not something that can be continued for the long term.

From The Financial Times:
China needs an “urgent” tightening of monetary policy to prevent the huge stimulus measures introduced this year from inflating stock and property bubbles, one of the country’s leading bankers has warned.

Qin Xiao – chairman of China Merchants Bank, the country’s sixth-biggest – says in Thursday’s Financial Times that the government should not be afraid of a “moderate slowdown” in the economy.

“Monetary policy must not neglect asset-price movements,” he writes. “Therefore it is urgent that China shifts from a loose monetary policy stance to a neutral one.”

Mr Qin’s unusually frank warning comes ahead of the publication on Thursday of third-quarter gross domestic product figures that are expected to underline the rapid recovery in China’s economy, with analysts forecasting growth of nearly 9 per cent compared to last year.


“This is the first thing you would expect the authorities to say before they begin to moderate policy,” said Stephen Green, economist at Standard Chartered in Shanghai. But any increases in interest rates or controls on lending were unlikely before Chinese New Year in February, he said.

Read On
China's response to the financial crisis has fascinated me. Is it all going to work? Is China going to continue to grow while much of the Western world deleverages/stagnates? Is China going to pull the world up with it? Is China going to be pulled down by the West?

At this point, I have no idea.


Mark Carver said...

I always felt that China's potential for recovery from the worldwide recession overshadowed most other countries. With its abundant resources and gargantuan labor pool, China could really do anything it wanted, whether in good times or bad. The question is how to corral everybody running around like crazy, tryin' ta git dat paper.

Mark said...

It seems like the powers that be are doing well so far in "getting everyone running around like crazy, tryin' ta git dat paper!"