In August the purchasing managers’ index for the manufacturing sector published by the China Federation of Logistics & Purchasing (CFLP) rose from 53.3 to 54 points and was thus well above the 50-point expansion threshold for the sixth month running. Other indicators, such as industrial production figures, also point to a continuation of the economic recovery. Nonetheless, we are not overly upbeat about economic momentum in the second half of the year. The impetus to growth from the domestic demand side, to date heavily credit-driven, is likely to ease. As we expected (NewsLine 01 July, 2009), the Chinese government is now reining in the expansionary lending for fear of a possible rise in non-performing loans at the banks and also for fear of a bubble on the stock market. This is also likely to be at least one of the reasons behind the almost 25% slide in the benchmark Shanghai stock exchange index since its annual high on 4 August.
China: How robust is the upswing really?
While the boost to growth from domestic demand will tend to ease, we are likely to see a growing impetus from export demand in the second half of the year on the back of the pickup in world trade. On balance, we see GDP growth rates holding up more or less at their second quarter level. Our growth forecast for this year therefore remains unchanged at 7.5%.
Gregor Eder
tel.: 49 / 69 / 2 63 – 5 33 58
e-mail: [email protected]