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    » 04/15/2010, 00.00

    CHINA

    Record growth (+11.9 per cent), but many fear bubble and unemployment



    First quarter growth hits three-year record. Inflation remains low at 2.2 per cent in March. However, the real estate market enters bubble-bursting territory, with banks overexposed. Now attention turns to unemployment.
    Beijing (AsiaNews/Agencies) – China’s economy grew by 11.9 per cent in the first quarter of 2010 from a year earlier, the National Bureau of Statistics (NBS) reported. Consumer prices rose 2.2 per cent last month compared to 2.7 in February, still many are concerned that it might accelerate, pulled by rising real estate prices and bank lending. Experts believe the government has to raise the cost of borrowing and revalue the yuan. Meanwhile, migrant workers are paying the price.

    The GDP rose beyond expectations in the first three months of the year, pushed by exports, which jumped 29 per cent in the same period, but also by government stimulus and consumer spending.

    The "momentum of national economic recovery" expanded further and has "a good foundation for reaching the targets set for the whole year,” NBS spokesman Li Xiaochao said.

    In March, retail sales climbed 18 per cent. Car sales leapt 76 percent in the first quarter from a year earlier, with Mercedes-Benz (China) Ltd. doubling. Industrial production rose 18.1 per cent the same month, but less than the 20.7 per cent gain in the first two months.

    Experts believe that, to avoid higher inflation, the authorities have to cut the stimulus and raise interest rates. Cheap loans favour real estate speculation. Residential and commercial real-estate prices in 70 cities jumped in fact 11.7 per cent in March from a year earlier.

    Some investors fear a property bubble in China, fuelled by 1.4 trillion new loans last year. For experts, this bubble must be stopped before it burst, but the authorities are concerned that more expensive loans will drive many away from real estate, whose prices might in turn collapse.

    Similarly, banks are also going through troubled waters. China’s four largest publicly traded banks— Industrial & Commercial Bank of China Ltd, China Construction Bank Corp, Bank of China Ltd and Bank of Communications Ltd—need 480 billion yuan ( billion) of fresh capital to maintain the right capital adequacy ratio, Industrial & Commercial Bank of China Ltd president Yang Kaisheng said.

    Complicating matters, many experts agree that to contain inflation Beijing must let the yuan appreciate. For the past 21 months, China’s currency has been pegged at about 6.83 to the dollar.

    This explains why US Treasury Secretary Timothy F Geithner’s unscheduled meeting with Chinese Deputy Premier Wang Qishan in Beijing on 8 April fuelled speculation. However, no one expects any major change soon.

    China’s Commerce Ministry on Thursday reaffirmed its opposition to a stronger yuan, arguing that it would do nothing to solve the problem of near double-digit US unemployment.

    At the same time, China itself is facing the need to create jobs for tens of millions of workers laid off during the global financial crisis. Many of them are leaving their native villages, drifting back to the cities, where they are not however finding as many openings as needed.

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    See also

    17/07/2008 CHINA
    Chinese inflation remains high, economic growth slows
    Inflation at 7.1% in June, while producer prices increase 8.8%, a more than 10-year record. China faces the dilemma of containing inflation without impairing production too seriously. Meanwhile, the worst energy crisis in years approaches.

    01/06/2010 CHINA
    Chinese growth slowing down again in May, Wen Jiabao voices concerns
    The growth in manufacturing activity is slowing down because of the European debt crisis and government measures to rein in the real estate boom. In Tokyo, Chinese PM Wen warns against the dangers of a second slump, but believes China is on track.

    12/01/2006 CHINA
    2005 record year for China trade

    The trade surplus tripled, reaching more than 100 billion US dollars. The data, released yesterday, will fuel calls for a revaluation of the yuan. But government economic bodies exclude this option to maintain high economic growth.



    03/01/2007 CHINA
    Meagre profits for luxury brands
    The big western names, drawn by the economic boom and potential huge markets, are selling far less than predicted. Luxury cars are an exception.

    15/09/2010 CHINA
    Crisis in China: 64 million empty apartments
    If the housing bubble bursts, millions of middle income families lose their savings. Premier Wen tells the Economic Forum in Tianjin, that "stabilizing house prices" is the "essential" duty for every local government. But experts doubt that local governments will collaborate.



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