Last week we got a taste, this week comes the confirmation the Chinese economy is now doing better than at any time during the past year.
Good figures for trade, (especially iron ore imports, which were a record) bank lending, car sales and power consumption suggested that growth was ticking over quite nicely.
This week we get the third quarter growth figures on Thursday, plus inflation, public investment, retail sales, industrial production.
All are expected show rises on the June quarter (and on August in the case of the monthly figures).
According to estimates from the likes of Goldman Sachs, Macquarie, etc, growth could have reached 9% or better in the third quarter, up from the 7.9% in the three months to June. Goldman Sachs reckons 9.5%.
One figure Western analysts will be looking for will be steel production figures for September and the quarter. Steel output and bank loans have become two major indicators examined by Western analysts for confirmation Chinese growth.
There are suggestions of a record of more than 52 million tonnes in the month and nearly 158 million tonnes for the quarter.
Chinese iron ore imports rose 36% to 469.4 million tonnes in the first nine months from the same period in 2008. Shipments have exceeded real demand by 50 million tonnes, China’s Iron and Steel Association said on October 12. It says this is leading to downward pressure on prices and has rejected the claims by BHP Billiton, Rio Tinto and Vale for iron ore price rises of up to 30% and coking coal price rises of a similar level.
Analysts are looking for a 15% rise in steel output in the three months. The World Steel Association last week forecast that China’s apparent steel use (a proxy for consumption, because it doesn’t take account of stock levels) will rise 14.9% this calendar year and then fall to a 5% growth rate in 2010.
Solidly positive figures for China will reinforce in the minds of more investors just how well placed Australia is to benefit from this growth.
A solid rise will set off more worries about investment and other bubbles, an idea knocked down in a recent current edition of The Economist magazine.
“China does not yet have dangerous bubbles in housing and shares that could threaten its recovery. Indeed, rising asset prices will help boost consumer spending over the next year, which will in turn help broaden China’s recovery,” The Economist wrote.
But to minimise the risk that China is starting to inflate its biggest bubble ever, the government does need to curb excessive liquidity.
That means allowing the yuan to appreciate. With interest rates likely to remain close to zero in America for some time, China cannot significantly tighten its own rates unless it allows its currency to rise.
If China’s growth has decoupled from America, then so must its monetary policy.
But China’s banking regulator thinks a timely reminder about risk and overly enthusiastic lending is in order.
In a notice posted on the website on Friday and reported in the official media, the regulator has urged a “scientific and reasonable” pace of lending by big banks in the country while warning them to improve risk management.
The notice said the country’s five major banks, the Industrial and Commercial Bank of China, Bank of China, China Construction Bank, Agricultural Bank of China, and Bank of Communications, took 47% share of the 8.15 trillion yuan of total bank loans in the country during the first nine months of 2009 and maintained a steady 200 billion yuan ($US29 billion) in monthly new lending during the third quarter.
But the commission’s vice-chairman, Jiang Dingzhi, called on those banks to improve risk management over lending so as to ensure the stability of the banking sector. He said the agency requires those banks to raise their provision coverage ratio to at least 150% within the year and puts tighter restrictions in bank lending to businesses in industries with overcapacity problems.