Agro Perspectiva

China’s Economy Grows More Than Estimated

13.07.2011 12:32 "Agro Perspectiva" (Kyiv) — China’s economy and industrial output expanded more than analysts predicted, driving up stocks across Asia as the nation maintains momentum after monetary tightening to cool inflation. Gross domestic product rose 9.5 percent in the second quarter from a year earlier, the statistics bureau said in Beijing today, after a 9.7 percent gain in the previous three months. The median estimate was 9.3 percent in a Bloomberg News survey of 18 economists. Industrial output advanced 15.1 percent in June, the most since May 2010. Demand is holding up in the fastest-growing major economy even after the central bank boosted lending rates five times since mid-October and lifted bank reserve requirements to a record. Premier Wen Jiabao said yesterday that stabilizing prices remains the top priority, after food costs soared in June. «This data should dispel concerns over a hard landing in China,» said Wendy Liu, a Hong Kong-based analyst with Royal Bank of Scotland. The Shanghai Composite Index of shares advanced 1.2 percent as of the 11:30 a.m. local-time break in trading and yuan forwards strengthened. Asian stocks climbed, halting a two-day slump. The economy expanded 2.2 percent in the second quarter from the first three months of the year, the statistics bureau said, picking up from 2.1 percent in January to March. Wen’s policy options are complicated by a faltering U.S. economy and Europe’s spreading debt crisis threatening export demand. Moody’s Investors Service yesterday cut Ireland’s debt rating to junk and soaring bond yields have signaled that the contagion could spread to Italy. The International Monetary Fund forecast last month that China’s economy will expand 9.6 percent this year, more than four times the pace for advanced economies. Fixed-asset investment, excluding rural households, rose 25.6 percent in the first half from a year earlier, today’s report showed. Retail sales expanded 17.7 percent last month from a year before, exceeding a median analyst estimate of 17 percent. June housing transactions rose 31 percent from May even after government curbs to cool the property market, statistics bureau data showed. The expansion in industrial output compared with the median 13.1 percent gain in a Bloomberg survey. Easing power shortages and «robust construction activities» may have boosted the number, along with a pickup in growth in steel production, according to Bank of America Merrill Lynch. Goldman Sachs Group Inc. cited an easing of supply-chain disruptions from Japan’s earthquake and a rebound in money- supply growth in June, along with improved energy supplies. While the global economy is increasingly dependent on China’s demand as the U.S. labor market deteriorates, investors have been concerned that tightening measures will choke off growth. The Shanghai Composite Index declined 10 percent from its April high through yesterday. Signs of a slowdown have spanned weakness in imports, a manufacturing index falling in June to the lowest level since February 2009, and carmaker General Motors Co. (GM) saying that sales may be at the low end of a forecast. At the same time, lending exceeded forecasts last month and growth in M2, the broadest measure of money supply, rebounded. Inflation has breached the government’s 4 percent ceiling every month this year, with consumer prices rising 6.4 percent in June from a year earlier, the most in three years. Pork, a Chinese staple, rose 57 percent and accounted for more than a fifth of June’s overall inflation rate. The People’s Bank of China has raised the one-year lending rate to 6.56 percent and the one-year deposit rate to 3.5 percent, announcing the latest increases on July 6. The nation’s biggest banks are required to set aside 21.5 percent of deposits as reserves, up from 17 percent in November, locking up cash that could fuel inflation. Ding Shuang, a senior economist at Citigroup Inc. in Hong Kong who previously worked at China’s central bank, said last week that he expects inflation to slow after this month. UBS AG, sees price gains remaining above 6 percent in July before moderating toward 4 percent at the end of the year.