China - The rising economy
2011-08-03 17:05:05
China's economy probably grew the least in almost two years last quarter, contributing to a global weakening that Premier Wen Jiabao confronts with more limited scope for policy response than during the 2008 world recession.
The government is forecast to report July 13 gross domestic product rose 9.3 percent from a year before, according to the median estimate in a Bloomberg survey, down from 9.7 percent the previous quarter. With data two days ago showing consumer prices climbed the most in three years in June, any easing in the central bank's monetary stance risks escalating price pressures.
China's slowdown was underscored by the weakest import gain since 2009 in June, limiting the chance for the U.S. and Europe to export their way out of their own domestic challenges. A 58 percent jump in bank credit in 2009-2010 and concern that local governments may default on loans leaves Wen with less room to unleash the scale of stimulus that aided the world in 2008.
"Any significant policy loosening or introduction of another big stimulus right now would run the risk of plunging the Chinese economy into a real hard landing, with inflation running out of control and government debt and bad loans piling up," said Lu Zhengwei, Shanghai-based chief economist at Industrial Bank Co., who was rated China's best analyst in 2010 by China Business News newspaper. "Softer growth is more sustainable" and will help contain inflation, he also said.
Stock Rally
Stock investors have in recent weeks signaled optimism that China will achieve a so-called soft landing where the expansion slows without causing corporate earnings and employment to tumble. The benchmark Shanghai Composite Index has advanced for three straight weeks, the longest streak since February...
Pork Prices
Prices have also been fueled by shortages of food due to adverse weather conditions and a slump in hog supplies, a trend that's contributed to rising social unrest across China. Pork prices jumped 57 percent in June from a year earlier, the government said last week, accounting for one-fifth of the month's inflation rate.
The People's Bank of China's latest effort to contain prices came July 6, with the fifth interest-rate increase since October. The central bank has also boosted banks' reserve requirements nine times since November to a record level...