Meltdown 101: China's heft and the global slump<http://news.yahoo.com/s/ap/20090416/ap_on_bi_ge/meltdown101_china_s_economy> By ELAINE KURTENBACH, AP Business Writer Elaine Kurtenbach, Ap Business Writer – Thu Apr 16, 3:39 pm ET
SHANGHAI – China's latest economic data just came in, and the signs are encouraging. While the economy grew at its slowest pace in more than a decade in the first quarter, other indicators suggest a possible bottoming out of the slowdown that brought the country's dazzling economic boom to a screeching halt late last year. Will good news for the world's third-largest economy help improve the prospects for a global recovery? Here are some questions and answers about China's place in the world economy . Q: How is China's economy doing? A: China's economy grew by 6.1 percent in the first three months of the year, helped by a revival in stalled industrial activity and stronger investment in factories and other infrastructure. That's down from 6.8 percent in the previous quarter, although China's habit of frequently revising its data makes analysis difficult. Year-on-year comparisons of many statistics for January through March are skewed by the relatively high figures for the first quarter of last year, when the economy was growing at double-digit rates. But data for March were much better than for January and February, suggesting an upturn, says economist Mingchun Sun of Nomura Securities. A 4 trillion yuan ($586 billion) stimulus package is boosting employment and revenues at construction companies and building materials makers thanks to a massive program to build new roads, railways and housing. Meanwhile, consumer sales rose about 15 percent as automakers saw record monthly sales in March thanks to tax cuts and other policies aimed at encouraging Chinese to buy new cars. Q: Why is China's economy doing better than many others? A: China keeps its banks and financial markets isolated from global capital flows, which shielded them from the worst of the mortgage-related crisis. State-owned banks are flush with cash and among the world's healthiest right now: lending, with government encouragement, surged to a monthly high of 1.9 trillion yuan ($277 billion) in March. China still has huge room for investments in public works, better productivity and other improvements that can help spur growth for decades to come. Low government debt allows for ample stimulus spending, and the country's nearly $2 trillion in foreign reserves are another vital resource. Q: Could a Chinese recovery help rescue the world economy? A: A recovery in China would help boost global demand as the country would likely buy more U.S. and European factory machinery and consumer goods and raw materials from Southeast Asia. But China depends on exports for a big share of its economic activity, and half its imports are raw materials or components used in goods that are then re-exported. So only a modest recovery is possible unless demand in Western markets picks up. Exports have plunged, throwing millions of people out of work and prompting factories to cancel or postpone investments. But imports of iron ore, crude oil, coal and other materials are bouncing back, thanks to government purchases for national stockpiles and a spike in orders by traders encouraged by low prices and transportation costs, according to Jing Ulrich, chairwoman of China equities for JP Morgan & Co. Q: What is the outlook for the Chinese economy in the coming months? A: China's leaders have set a target for 8 percent growth this year and say they are confident of reaching it. Economists' forecasts range from 8 percent to as low as 5 percent. Thursday's announcement of strong March economic performance prompted Swiss investment bank UBS AG to raise its growth forecast to 7 percent to 7.5 percent, from 6.5 percent. Q: What are the potential risks? A: The biggest risk to China is the global economy. Weak demand could lead to more job losses, undermining the rising consumer spending economists say is needed to sustain growth. The government needs to ensure that its massive spending creates jobs, said Mei Jianping, a finance professor at the Cheung Kong Graduate School of Business in Beijing. "Infrastructure spending and other government spending do not generate a lot of employment. That is my main concern, not economic growth," Mei said. Q: Are official statistics on China's economy considered reliable? A: There's some debate over reliability of the numbers. But at the same time, economists rely on them as they look for clues about where the economy is headed. --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [email protected] For more options, visit this group at http://groups.google.com/group/globalspeculators?hl=en -~----------~----~----~----~------~----~------~--~---
