Home' Trinidad and Tobago Guardian : January 21st 2016 Contents BG22 CHINA
BUSINESS GUARDIAN www.guardian.co.tt JANUARY 21 • 2016
Chinese economic growth, yet again, managed to
come in around expectations for the December quarter
of 2015, just as it has done for last five quarters.
At 6.8 per cent, the annualised quarterly growth
rate was right on expectations. The annual growth
rate, at 6.9 per cent, was also close to the 7.0 per
cent level targeted by the government.
Its stability---and accuracy---would put Swiss watch-
makers to shame.
While to many the unerring accuracy points to the
data being flimsy---a case of the government simply
starting with the final GDP figure and working back---
the internals of the report suggest that China s new
growth engine---services and consumption---continued
to perform strongly, managing to offset a slowdown
in heavy industry, investment and trade, the areas
that once powered China s economy.
According to the NBS, the nation s tertiary industry,
largely encompassing services accounted for 50.5 per
cent of GDP in 2015, an acceleration of 2.4 percentage
points on a year earlier and some 10.0 percentage
points above secondary industries, the sector that
up until recently was the largest component of China s
This means the services-heavy tertiary sector is
now more than half of the economy.
There was also strong data on the other great hope
for China s economic rebalancing: consumption.
Over the year, total retail sales of consumer goods
hit 30,093.1 billion yuan according to the government,
a nominal annual increase of 10.7 per cent. After
adjusting for price movements, that equates to an
annual growth rate of 10.6 per cent.
As evidence of the growing size of China s middle
class, the median national disposal income was 19,281
yuan, up 9.7 per cent year-on-year in nominal terms.
China s economic rebalancing looks solid, at the
very least, for now. AFP
Private sector forecasters say growth in
the world s No 2 economy at best came in
slightly above the previous quarter s 6.9 per
cent and at worst fell as low as 6.4 per cent.
That would be less than half 2007 s peak
of 14.2 per cent. But it would be the sec-
ond-strongest among major countries, sur-
passed only by India, which is one-tenth
China s size.
Growth has fallen steadily over the past
five years as the ruling Communist Party
tries to steer away from a worn-out model
based on investment and trade to self-sus-
taining growth driven by domestic con-
sumption and services. For the full year, the
International Monetary Fund and private
sector forecasters expect 2015 growth to
have slowed to 6.8 per cent. That would be
in line with the ruling party s goal of "about
seven per cent." Growth is forecast to slow
further this year and next before rebounding
toward the end of the decade.
Forecasters say retail sales and other
industries likely improved in December, sug-
gesting government spending and repeated
interest rate cuts have helped to put a floor
under the downturn. Lending growth in
December exceeded forecasts.
Surveys showed manufacturing activity
weaker than forecast, but analysts say it still
grew. Investment in factories, housing and
other fixed assets also is expected to have
ticked up, helped by heavier government
spending on public works construction.
Nomura analyst Brian Tan expects 4Q
growth to be slower than 3Q, mainly due
to weaker financial services, but says the
"timelier December slew of data should hint
that growth is stabilising."
On edge about the possibility of a global
slowdown, foreign financial markets have
taken every shudder from China as a sign
of an impending slump. Slower Chinese
economic growth, and especially the end
of the country s frenzied construction boom,
has damped demand for iron ore, copper
and other industrial raw materials from
Australia, Brazil and other suppliers. Weak-
ness in investment or consumer spending
could hurt demand for technology and high-
er-margin manufactured goods from Europe,
the United States and Japan.
Stock market turmoil
The collapse of a Chinese stock price
bubble in June fueled fears abroad and raised
doubts about Beijing s management skills
but had little impact on the rest of the econ-
omy. Chinese stocks have little connection
to what the ruling party calls the "real econ-
The biggest companies on China s two
stock exchanges are state-owned, so traders
make decisions based on changes in gov-
ernment policy and the availability of credit
to finance trading.
The flood of money into financial indus-
tries as millions of novice investors rushed
into stock trading briefly inflated the stock
market s contribution to economic growth.
It collapsed along with the stock boom but
the growth trend in other industries was
unchanged. Stock prices rallied in late 2015
after a multibillion-dollar government inter-
vention but have fallen back since late
December as Beijing unwinds its emergency
China s central bank said on Tuesday it would
inject more than 600 billion yuan (US$91.22 billion)
to help ease a liquidity squeeze expected before the
Lunar New Year in early February.
The People s Bank of China (PBOC) will inject the
funds via the three policy tools of the standing lending
facility (SLF), medium-term lending facility (MLF)
and pledged supplementary lending (PSL), it said in
a statement on its website.
Liquidity conditions often tighten ahead of the
week-long new year holiday and the central bank
usually injects large amounts of cash into the banking
system prior to the festivities to keep rates steady.
The first day of the new year is February 8.
Analysts say the PBOC s move could reduce the
need for it to cut banks reserve requirement ratios
(RRR) in the near future, but the central bank remains
under pressure to ease policy to support a slowing
Growth in the fourth quarter slowed to the weakest
since the financial crisis, increasing pressure on a
government struggling to regain the confidence of
investors after perceived policy missteps jolted global
"The liquidity injections may lower the urgency
for cutting bank reserve ratios in the near term," said
Li Huiyong, an economist at Shenyin & Wanguo
Securities in Shanghai.
"This reflects the central bank s intention to keep
liquidity ample by using flexible policy tools."
China to report slower
but still strong growth
...central bank to
inject US$91B to
ease liquidity strains
China just passed a
milestone in the
The head of the newly opened Asia Infra-
structure Investment Bank said the China-
led group is aiming to approve its first loans
before the end of the year, part of Beijing s
efforts to weave together regional trade part-
ners and solidify its global status.
The AIIB officially opened at a ceremony
on Saturday in Beijing, formalising the emer-
gence of a competitor to the Washington-
led World Bank and strengthening China s
influence over global development and finance.
AIIB s inaugural president, the Chinese
banker Jin Liqun, said Sunday that Asia still
faces "severe connectivity gaps and significant
The bank would welcome the United States
and Japan, two economic powers that have
declined invitations to join the organisation,
said Jin, who was previously a high-ranking
official at both the World Bank and Japan-
led Asian Development Bank.
Washington has said it welcomes the addi-
tional financing for development but had
expressed concern looser lending standards
might undercut efforts by existing institutions
to promote environmental and other safe-
guards. Chinese officials have said the bank
will complement existing institutions and
promised to adhere to international lending
Chinese President Xi Jinping has outlined
a broad plan called "One Belt One Road" to
deepen trade relations with neighboring coun-
tries and open new markets, with the AIIB
a key component of that strategy. Leaders in
the world s No 2 economy have long felt they
don t have proportional influence inside inter-
national financial institutions dominated by
China pledged to put up most of the bank s
US$50 billion in capital and says the total will
eventually be as high as US$100 billion. AP
Development bank aims to swiftly approve loans
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