News Analysis: "Hard landing" imminent in China's economy?

09:11, May 25, 2011      

Email | Print | Subscribe | Comments | Forum 

Even with first-quarter growth at 9.7 percent, worries of a "hard landing" of the world's second largest economy begin to emerge, as the government switches from stimulating to deflating the economy.

Private business aren't making the money they used to. Production costs are rising and borrowing has become harder as the government has hiked interest rates and raised the reserve ratio for banks amid high inflation.

The manufacturing sector PMI released by the National Bureau of Statistics, a key measure of the outlook for industrial growth, dropped to 52.9 percent in April, down from 53.4 percent in March.

The value-added industrial output grew 13.4 percent in April, 1 percentage point lower than a month earlier.

The economic data suggests the probability of hard landing is building in China, according to JPMorgan Chase.

However, Fan Jianping, chief economist with the State Information Center, contended a hard landing is unlikely.

The situation in China is not like that which followed the U.S. credit crisis in 2008, rather it's the result of the macro-economic regulation, he said.

China's growth decelerated to 6.7 percent in the first quarter of 2009, as the global financial crisis sapped demands for Chinese exports.

"Such drastic slowdown would not repeat today, as the global economy is on the track of mild recovery and the external demand is at a healthy level," said Peng Wensheng, chief economist with the China International Capital Corporation.

He predicted China's GDP growth would slow to 8.4 percent in the fourth quarter of the year. However that can not be recognized as a hard landing.

Lian Ping, chief economist with the Bank of Communications, said robust growth in the fixed-assets investment and trade surplus do not support the possibility of hard landing.

He estimated the economy would grow by nearly 10 percent in the second quarter from a low comparison basis a year ago.

Fears of hard landing drove China's stock market down by nearly 3 percent on Monday after the China Manufacturing Purchasing Managers' Index compiled by HSBC fell to a 10-month low of 51.1 in May.

Qu Hongbin, HSBC's Chief Economist for China, said that the PMI data was consistent with the growth of industrial output and GDP, while the "hard landing" concern is unnecessary.

Economists agreed the top priority of Chinese economy is to fight against inflation.

The Consumer Price Index (CPI) was 5.3 percent in April, slightly down from March's 32-month high of 5.4 percent.

The central bank has raised the reserve requirement ratio (RRR) of commercial banks five times this year, and also hiked the benchmark interest rates four times since last October.

Market analysts expect another rates hike in June.

Zhang Yansheng, a researcher with the National Development and Reform Commission (NDRC), said inflation pressure would stay for some time, and enterprises should prepare for that.

Fan noted the slowdown momentum is a good thing since it is a necessary condition to tame consumer prices, and could also make way for economic restructuring.

The Chinese government is taking steps to change China's growth pattern to one based on innovation and domestic demand.

"In the days of fast growth, businesses felt good about their strategy. That has protected the outdated capacity," Fan said.

He said although the present slowdown is intended by the government and within control, the macro-policy should be forward-looking to avoid a real recession.

"The monetary tightening should fade before the price increase is curbed. Otherwise a deep slowdown will hurt the next round of growth," he said.

Source: Xinhua
 
 
     
 
Wen Jiabao attends trilateral leaders' meeting of China,Japan and ROK
 
The Third China-U.S.Strategic and Economic Dialogue
 
     
 
 
 
  Weekly review  
 
May 20   World Economic Forum China office marks fifth anniversary
 
May 18   China, Pakistan joined in bonds of brotherhood
May 20   'Central axis' of Beijing applies for world cultural heritage
May 20   In pictures: Int'l 'Financial Security' symposium opens in Beijing
May 21   The week in pictures
May 16   Beijing aims for massive influx of overseas talent in 2011
May 16   Singapore election coverage shows Western arrogance
May 16   Chinese naval helicopter conducts target practice in Gulf of Aden
May 17   Strategies for harmony between militaries of China, US
May 17   Pakistani Prime Minister hails China as true friend
 
     
 
 

(Editor:梁军)

  • Do you have anything to say?

双语词典
dictionary

  
Special Coverage
  • 3rd Anniversary Of Wenchuan Earthquake
  • Third China-U.S. Strategic and Economic Dialogue
Major headlines
Editor's Pick
  • Fire breaks out at Beijing's high-rise hotel
  • The Queen treats the Obamas to a state banquet
  • BookExpo America kicks off in New York
  • Honghu Lake dwindles by a third in water surface
  • CPC pledges more exchanges with Kazakh ruling party
Hot Forum Dicussion