Tiger stalking dragon
The Age
Saturday January 2, 2010
THE Chinese economy has rolled into the new year at a scorching pace, as the country's most respected business news team re-emerged from political exile to warn that inflation was stalking "like a tiger".The official Purchasing Manager's Index rose to 56.6 in December, signalling China's manufacturing sector expanded at the fastest pace since being temporarily stalled by the financial crisis in late 2008.The PMI, which gave the first official read on the economy for December, was up from 55.2 in the previous month after steadily rising since a financial crisis low of 38.8 in November 2008.A reading above 50 indicates expansion.The unexpectedly strong PMI data helps focus attention on upside risks to the economy that will become more evident in coming weeks when annual inflation and export numbers turn strongly positive for the first time since the crisis.Chinese policymakers and advisers are now turning to the challenge of preventing overheating, following the scale and success of China's credit and fiscal stimulus program."Inflation like a tiger," reads the cover story headline of Century Weekly. "Tepid CPI numbers barely conceal the reality of ferociously rising inflation," says the subheading.But the January 4 edition of Century Weekly is mostly drawing attention because it is the first under hard-hitting editor Hu Shuli, who moved with almost her entire editorial staff from Caijing magazine after falling out over censorship and business conflicts with publishers and patrons in November.Ms Hu's team of journalists stayed with her despite many receiving offers to double their salaries if they remained at Caijing and despite not knowing whether Ms Hu would find a magazine to publish their work.Strong December figures will be amplified by the Chinese statistical convention of publishing data referenced to a year earlier rather than the preceding month or quarter.Economists at China Investment Capital Corporation expect that the December export figures will show growth of 4.5 per cent from a year earlier, while producer price inflation will also turn positive, to 0.2 per cent.CICC expects December CPI to rise to 1.6 per cent, after turning positive in November, and industrial production growth to hit a staggering 20 per cent.The strong December figures will be from a higher base, with the National Bureau of Statistics discovering last week 1.4 trillion yuan of mainly services sector activity for 2008.Premier Wen Jiabao said last week that China would not make the mistake of ending stimulus policies too soon, even as he signalled that the Government might cool new lending that reached an unprecedented $1.3 trillion in the first 11 months of last year.Mr Wen also said China would "absolutely not yield" to pressure from foreign countries for currency gains as the nation holds the yuan at about 6.83 per US dollar.Commerce Minister Chen Deming has pledged to maintain export tax rebates in 2010 because of a slow recovery in global demand.Also aiding manufacturers, a program of subsidies for purchases of appliances such as refrigerators and washing machines within rural areas will be expanded by raising price caps to make more products eligible.China's economic growth in the fourth quarter probably topped the third quarter's 8.9 per cent, Xu Xianchun, deputy head of the statistics bureau said last month. Gross domestic product probably expanded 8.5 per cent in 2009 and may grow 9.4 per cent in 2010, according to a Bloomberg News survey of economists.The manufacturing index, released by the logistics federation and the Beijing-based National Bureau of Statistics, is based on replies to questionnaires sent to purchasing executives at more than 730 companies in 20 industries. The key survey started in January 2005.
© 2010 The Age
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