Snowstorms cool industrial output

PUBLISHED : Friday, 14 March, 2008, 12:00am
UPDATED : Friday, 14 March, 2008, 12:00am

US economic woes, yuan strength and further tightening steps to extend slowdown

Mainland industrial output in the first two months of this year grew at the slowest pace since December 2006 as the worst snowstorms in 50 years disrupted production in central, southern and eastern provinces.

The 15.4 per cent year-on-year growth rate was below the 17.4 per cent increase posted in December and the 18.5 per cent rise for the full year, the National Bureau of Statistics said. Industrial production last year grew at the fastest pace since 1993.

Blizzards hit 21 out of 31 provinces in January and last month, blocking transport, cutting power supplies, shutting smelters and factories and killing at least 129 people.

Economists say the slowdown is expected to continue as the United States economic malaise hits exports, the yuan appreciates and as Beijing's credit curbs begin to bite.

Because the data has been distorted by the snowstorms, they say it is too early to hail the success of tighter monetary policies, which were introduced at the end of last year to prevent economic overheating and curb inflation. Many economists expect the mainland to raise interest rates at least once this year.

The statistics bureau provided the two-month figure to even out the effects of the Lunar New Year, which falls at different times each year. Many factories close during the long holiday.

Electricity output growth slowed to 11.3 per cent year on year from 13.8 per cent in November. December data was not available. Growth in vehicle sales slumped to 12.5 per cent from 21.7 per cent in December. Cement output dropped 2.8 per cent from an increase of 10.1 per cent in December.

Raw coal production growth rose to 13.4 per cent from 8 per cent in November because of ramped up production to supply coal to power plants during the snowstorms.

'The slowdown was partially driven by the snowstorms and partially by the central bank's credit tightening which limited the amount of loans firms can borrow,' said Lehman Brothers economist Sun Mingchun. 'The trend is definitely down over the next few months.'

Mainland exports rose 6.5 per cent year on year last month, the slowest pace in almost six years.

Jing Ulrich, the chairwoman of China equities at JP Morgan Securities, said the downward trend in manufacturing and exports had some positive aspects and pointed towards a soft landing. 'China has diversified its export markets in the past half decade. Last year the country shipped more goods to emerging markets than to the US.'

Slow hum

Industrial output in the first two months of the year grew at: 15.4%