BEIJING: China’s economy probably grew the least in 10 quarters in the last three months of 2011 and may cool further as export demand slumps and officials prolong a campaign against property bubbles.
Gross domestic product, the value of all goods and services produced, rose 8.7% from a year earlier, the slowest pace since the second quarter of 2009, according to the median forecast of 26 economists surveyed by Bloomberg News. The data, and indicators for investment, retail sales and industrial production, are scheduled for release today.
The fourth straight quarterly slowdown in the world’s second-largest economy adds to concerns that global expansion is faltering, with the International Monetary Fund (IMF) warning of near-zero growth in Europe and a “substantial” cut to its global forecast. China’s exports rose the least in two years in December and inflation eased to a 15-month low, bolstering the case for Premier Wen Jiabao to loosen policies.
“The worst is yet to come and more easing measures will be in the pipeline in coming months,” said Zhang Zhiwei, Hong Kong-based chief China economist at Nomura Holdings Inc, who previously worked at the IMF. “Increasing downside risks in China will hurt the outlook for other economies especially commodities exporters such as Australia and Brazil.”
Growth might “trough” at 7.5% in the three months through March and 7.6% in the second quarter, Zhang said. That might prompt the central bank to “front-load” policy easing into the first half, with one interest-rate cut in March and three reductions to banks’ reserve requirement ratios, he said.
Asian stocks dropped ahead of a debt sale yesterday by France after Standard & Poor’s stripped the country of its top rating and cut eight other European nations, stoking concern the region’s debt crisis may worsen. The MSCI Asia Pacific Index fell 1.3% as of 3.50pm in Tokyo. The measure added 2.2% last week.
In China, shares fell, dragging the benchmark index lower for a fourth day. The Shanghai Composite Index dropped 1.5% at 2.51pm. The yuan fell to 6.3165 per dollar on concern Europe’s crisis will slow Asia’s biggest economy.
China’s industrial production probably grew 12.3% in December from a year earlier, according to a separate Bloomberg survey of economists, the smallest gain since August 2009. Fixed-asset investment excluding rural households probably expanded 24.1% for the whole of 2011, little changed from 2010’s pace.
Retail sales, which include spending by government, companies and households, advanced 17.2% last month from a year earlier, a separate poll showed.
China’s growth is moderating as Europe’s debt crisis and weak US expansion hurt exports and Wen’s campaign to rein in inflation and property prices damps output. In October, he said the government would “fine-tune” economic policies as needed amid a deteriorating global outlook and reiterated that pledge as recently as Jan 3, describing business conditions this quarter as “relatively difficult.”
Alcoa Inc, the largest US aluminum producer, this month predicted growth in demand for the metal in China, the world’s biggest user, might slow to 12% this year from 15% last year.
Signs that the world’s biggest consumer of steel and copper is cooling include the smallest increase in imports and exports in December for two years, excluding holiday distortions. Growth in car sales slowed last year, trailing expansion in the United States for the first time in at least 14 years.
A deeper recession in Europe, which might cause a sharper slump in demand for China’s exports, and a “disorderly correction” in the property market were the biggest risks to the economy this year, said Chang Jian, a Hong Kong-based economist at Barclays Capital Asia Ltd.
The world’s largest exporter might see shipment growth halve this year from a 20% pace in 2011. – Bloomberg
, while property investment, which accounted for about a fifth of the nation’s fixed-asset spending, might expand at half last year’s rate, according to Chang.
China’s home prices fell for a fourth month in December compared with the previous month after the government reiterated plans to maintain curbs that include higher down-payment and mortgage requirements, according to SouFun Holdings Ltd, the country’s biggest real-estate website owner. Cities including Beijing and Shanghai have said they would maintain home purchase restrictions this year.
Nomura’s Zhang sees “ripple effects” from the cooling property market, as sliding sales dent housing investment and construction, crimp demand for raw materials such as steel and cement, and hurt developers’ earnings. – Bloomberg