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China's economy 'bottoming out'
Publication Date : 19-10-2012
China showed early signs of recovery from its painful slowdown, as industrial activity, investment and retail sales picked up last month.
Even as third-quarter growth dropped to a three-year low, the world's No.2 economy met market forecasts with its 7.4 per cent showing, down from 7.6 per cent in the second quarter.
Beijing officials signalled the worst may be over.
"We can tentatively conclude that the economy's slowdown is currently shifting from a slowdown to bottoming out," Statistics Bureau spokesman Sheng Liayun said yesterday.
He was speaking at a press briefing to release third quarter data, which showed a 2.2 per cent acceleration quarter-on-quarter - the biggest gain this year.
This is up from 2 per cent in the April to June period.
China's stocks leapt at the news, with the benchmark index hitting a five-week high.
The Shanghai Composite Index closed 1.2 per cent higher, while Asian bourses also climbed, bouyed up by unexpectedly strong US housing data as well as hopes that China has turned the corner.
A recovery for the world's factory and the biggest population of 1.3 billion consumers would revive the Chinese appetite for resources like steel and iron from key trading partners like Australia and Latin America, as well as luxury goods and high-end equipment from the West.
It would also mean more business for Asian neighbours, who supply it with components for assembly, and a growing amount of consumer items from cookies to gadgets. With the world's two other engines of economic growth - the United States and European Union - stalled, the state of China's economy is being closely watched by business leaders.
Analysts and some Chinese enterprises, however, were not ready to cheer a quick rebound yet. They cautioned that weak global demand and shaky business confidence locally may linger till next year. "Those fearing a hard landing will be able to sleep a little better tonight, but those positioned for a clear recovery might be disappointed," noted Beijing-based IHS Global Insight economist Alistair Thornton. "The picture is one of emerging stabilisation, not the return of unbridled optimism."
Sophie Xiao, who runs a food products plant in Inner Mongolia, echoed this. "We are still very pessimistic about our industry prospects," she said, noting that she had to halve staff to 15 this year to deal with rising costs and poor sales. "I don't know why the statistics bureau says the economy has stabilised... where is the proof on the ground?" she asked.
Some market players also wondered whether industrial health may be weaker than official data suggests. They noted that electricity usage growth, seen as a more reliable indicator, was at about half the average rate of the last five years.
On Wednesday, Premier Wen Jiabao said there were "positive changes" in China's economic situation in the third quarter. The government is confident of achieving its annual target of 7.5 per cent GDP growth, he was quoted by state news agency Xinhua as saying. Meeting this target would mean at least 6.9per cent growth in the fourth quarter.
Analysts said that is not a problem, as Beijing seeks to maintain stability on all fronts ahead of a leadership transition which starts on Nov8. After all, it has already invested in more stimulus projects to keep the momentum. "In the fourth quarter, investment growth will be a highlight," said Renmin University professor Liu Yuanchun in Beijing.