China’s growth picks up pace amid leadership transition

BEIJING: China released a slew of figures yesterday showing growth of the world’s No. 2 economy gaining pace, as the Communist Party meets to anoint new leaders tasked with sustaining the country’s economic miracle.
The statistics bureau said output at the millions of factories, workshops and mines rose 9.6 percent year on year in October, from 9.2 percent in September, indicating the country is emerging from a slumber that has also dragged on the global economy.
The numbers will no doubt be welcomed by the party as it stages its week-long congress, where President Hu Jintao said China needed to reform its economy to ensure it is “driven more by domestic demand”.
Other figures released yesterday by the bureau — including retail sales, fixed asset investment, and inflation — also showed an improvement.
The data add to signs that China’s economy is rebounding after growth slowed for seven straight quarters, hitting 7.4 percent in the three months through September, its weakest performance in more than three years.
In a speech Thursday to open the pivotal Communist Party Congress Hu called for economic reform to boost domestic consumption in a bid to create a new growth model, echoing mounting calls for change to stabilize growth amid the slowdown.
At the event, held every five years to trumpet China’s political and economic leadership credentials, Hu offered a mixed message, also insisting on the primacy of the party-led state sector, which has traditionally been and continues to be a major player in the country’s economy despite decades of increasing openness.
“What a lovely dataset to welcome in China’s new set of leaders,” IHS Global Insight economists Ren Xianfang and Alistair Thornton wrote in a research note Friday after the data release.
“The stabilization looks to be on firmer ground.”
Retail sales, the main measure of consumer spending, rose 14.5 percent year on year in October, from 14.2 percent in September, while fixed-asset investment, a key gauge of infrastructure spending, rose 20.7 percent in the first 10 months of 2012, from 20.5 percent in January-September.
China’s consumer price index, the main measure of inflation, slipped to a near three-year-low 1.7 percent in October, the sixth month out of the past seven it has slowed, giving lawmakers a little more room to loosen monetary policy.
Ren and Thornton partially attributed the recent encouraging performance to aggressive central bank monetary support via net liquidity injections to bolster the economy ahead of the country’s once-in-a-decade leadership transition, which began Thursday.
“The government could not risk a downside shock this month, and it appears their strategy to bolster growth has gained traction over the past couple of months,” said Ren and Thornton.
While the October figures will give Beijing room to loosen monetary policy they have actually reduced the urgency for such a move, with analysts saying they will likely provide impetus to stimulate consumer spending.
“The data provided fresh evidence of an economic recovery, so the government will likely continue with its current fiscal and monetary policies and there’s no need to step up efforts,” Liao Qun, a Hong Kong-based economist at Citic Bank International, told AFP.
Authorities have taken steps to boost growth by cutting interest rates twice in less than a month earlier this year while they have also reduced the amount of funds banks must keep in reserve three times since December to encourage lending.
Liao said that it was unlikely authorities would make further such cuts but would use other tools to support the economy.
“The government will continue to implement its investment plan for infrastructure projects and maintain its subsidy program to boost consumption,” he said.