Economists see strong growth in third quarter
A strong recovery in the mainland economy in the second half could lift annual growth above expectations as government spending boosts the domestic market, economists said yesterday.
'The amount of money that has been thrown into the economy virtually guarantees 8 per cent growth for the next two years,' said Glenn Maguire, the chief economist for Asia at Societe Generale. 'We are going to see a very strong third quarter, which is when the period of maximum stimulus comes in, and it potentially could see double-digit growth.'
Waves of capital have started to pour through the mainland economy, stemming from the government's 4 trillion yuan (HK$4.54 trillion) stimulus plan unveiled last year and record levels of new loan growth.
Domestic consumption has partly offset a slump in exports, as retail sales, car sales and industrial production have rallied.
The World Bank recently upgraded its forecast for mainland economic growth this year to 7.2 per cent from 6.5 per cent.
Ben Simpfendorfer, the chief China economist at Royal Bank of Scotland in Hong Kong, said mainland economic expansion this year may surpass his bank's 7 per cent forecast. However, he added that the economy would still have to undergo a painful rebalancing to account for the drop-off in exports, which plunged 26.4 per cent in May.
Mr Maguire was also cautious about the prospects of an economy primarily driven by internal forces.
'The key question is the composition of that growth,' he said. 'It is overwhelmingly skewed to investment.'
The mainland is set to announce its second-quarter economic growth figure this month. The economy expanded by double digits for 10 consecutive quarters stretching back to 2006 before dipping to 9 per cent in the third quarter last year.
The long-term sustainability of new loan growth has also come under scrutiny. Mainland lenders issued 5.17 trillion yuan in new loans in the first four months of the year, surpassing the government's full-year target of 5 trillion yuan.
'These loans ... injected into the Chinese market are not being productively used, and the consequence is you have the next bubble being built,' said Philip Jehle, the head of the private clients unit at Lombard Odier Darier Hentsch (Asia).
Additional reporting by Torrance Wong and Cindy Shi
Beating forecasts
The chief China economist for RBS says mainland growth this year may exceed: 7%
