Thursday 15 April 2010


CHINESE GDP: WHAT THE EXPERTS SAY

The Guardian, April 15, 2010

The news that Chinese GDP grew by 11.9% year on year in the first three months of 2010 has raised fears that the country could be overheating. Some economists, though, believe that while interest rates may rise this year, China is still in a strong position.

Mark Williams, senior china economist at Capital Economics
At first glance, today's GDP data might suggest that China is overheating. However, the acceleration in year-on-year growth in Q1 was entirely due to weakness a year ago. Growth has continued to slow in year-on-year terms and the economy is now expanding at what is, for China, an unremarkable pace. Price pressures too seem to be easing. While we expect policy tightening over the coming quarter, there is no need for dramatic measures.

In the long-run, China would be better served by structurally higher interest rates – they are currently far too low for moderate rate adjustments to make any difference to loan demand. This means that the People's Bank has an incentive to raise them (we forecast two 27bp hikes to the benchmark 12m lending rate this year with the first move in May) with little reason to fear that doing so would endanger the recovery. Limited rate hikes may also be desirable to keep inflation expectations in check – the State Council statement said it thought expectations were still rising.

(...) [artículo aquí]

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