Reuters: China’s annual economic growth may have quickened to 7.8% in the fourth quarter a Reuters poll showed, snapping seven straight quarters of weaker expansion, but the recovery is likely to be tepid and the economy may need continued policy support.
The median forecast of 24 analysts polled is for gross domestic product to have expanded 7.8% in Q4 from a year earlier, quickening from 7.4% in the third quarter the weakest expansion since the depths of the global financial crisis in early 2009.
The modest recovery in the world’s second-largest economy follows a raft of pro-growth policy steps over recent months, and may reassure China’s leaders after November’s power transition. But the outlook in 2013 remains cloudy given the lingering global uncertainties.
“We expect growth of the Chinese economy to re-accelerate to 7.8% in the fourth quarter from 7.4% in Q3 thanks to accommodative policy and inventory restocking,” said China economist at OCBC Bank in Singapore Dongming Xie.
“The economy is expected to recover further in 2013. But the pace of recovery is unlikely to be significant due to the still weak Euro zone and Japanese economy.”
Economic activity has picked up since September, supported by faster infrastructure investment and a heating up of the housing market. The factory sector is also picking up as the de-stocking cycle, during which firms ran down inventories in response to the downturn, comes to an end.
Two separate purchasing managers’ index surveys of the vast manufacturing sector last week also suggested China’s economic growth was picking up late in 2012, although signs persist that it is still depending primarily on state-led investment.
Indeed, the poll revealed few signs of improvement in economic activity in December, suggesting the policy-driven recovery could be shallow and fragile.
Fixed-asset investment, a key driver of economic growth, is expected to have risen 20.7% in the whole of 2012 from a year earlier, unchanged from the first 11 months. The Government only publishes cumulative data on investment.
Consumption is expected to hold steady, with retail sales in December forecast to expand 14.9% from a year earlier. Factory output is estimated to have grown 10.1% in December unchanged from November’s pace.
China was expected to achieve economic growth of 7.7% in 2012, forecasts in a benchmark Reuters poll showed. That would mark the slowest full-year expansion since 1999 and a clear slowdown from the roughly 10% annual growth in China seen for most of the last 30 years.
analysts expect the economy to grow around 8% this year, as the Government is seen keeping policies largely accommodative following the once-a-decade leadership handover at the top of the ruling Communist Party late last year.
Chinese leaders have promised to maintain a prudent monetary policy and pro-active fiscal policy in 2013, leaving room for manoeuvre in the face of global economic risks while deepening reforms to support long-term growth.
The Government has relied on policy fine-tuning to support growth, studiously avoiding any hint of repeating a 4 trillion Yuan stimulus package it unleashed in response to the 2008/09 crisis, which led to a debt-fuelled spending binge by local Governments.
The restrained policy response included the Central Bank’s two cuts in benchmark interest rates around mid-2012 and three cuts in banks’ reserve requirement ratios (RRR) since late 2011.
The monetary easing was accompanied by the quickening of approvals for infrastructure projects by the National Development and Reform Commission (NDRC), the country’s top economic planner, to spur investment expansion.
But the Central Bank, fearful of a flare-up in property prices and consumer inflation, has in recent months refrained from cutting interest rates or RRR, opting to inject short-term cash into money markets to help ease credit strains.
The GDP and activity data will be released at 0200 GMT on 18 January. Surprisingly weaker readings from the data deluge could prompt investors to cut exposure to riskier assets such as stocks and commodities.
Few analysts expect the central bank to cut benchmark interest rates in the near future, but market expectations persist that it could still cut bank reserve ratios to step-up bank lending as a means of underpinning economic growth.