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China economy grew 9pct in Q4

Reuters reported that China economy grew faster than expected in the fourth quarter, although tighter credit at home and weak export markets still weighed, dragging annual growth in gross domestic product to 8.9% in the fourth quarter and its weakest pace in 2-1/2 years.

Key points

1. Q4 GDP grew 8.9% YoY

2. December factory output up by 12.8 YoY

3. December retail sales up by 18.1%YoY

4. January to December FAI up by 23.8%YoY

Mr Michael Spencer Chief Economist Asia Pacific for Deutsche Bank in Hong Kong said "What's happened in December is to some extent the pre-Lunar New Year bounce in activity and prices. What we're seeing in December is the seasonal effect. If it is just a seasonal effect then obviously what that means is January to February will be weaker.

"It's fair to say the economy is holding up better but it's hard to say if that's just a statistical artifact of the short calendar. Credit growth was 750 billion in December which was a little on the low side, in our view. Policy makers talk about having room to ease but we don't see them doing that at the moment."

Mr Yao Wei China economist at Societe Generale Hong Kong said "The headline number is better than expected, but if you look at the detail, there are still a lot of areas for concern. The property slowdown has gathered speed and property investment growth slowed sharply to only 12%YoY in December. New property starts slowed all the way to only 0.9%YoY. It indicates that in Q1 2012 the numbers will be very unpleasant. Policy easing will continue."

Mr Kevin Lai Economist, Daiwa in Hong Kong said "The slowdown has been orderly. Consumption, retail sales continue to be strong. Overall growth momentum continues to be strong. The slowdown is not scary, so we are not going to get massive policy easing. There will be no interest rate cuts. We expect four more RRR cuts at 50 basis points each."

Mr George Worthington Chief Economist, Asia Pacific for IFR Markets in Sydney said "These numbers do not portray an economy heading for a hard landing, although the rapid slowdown in fixed-asset investment points to weakness in a key driver of GDP.”

He said that "For all of 2011, spending jumped 23.8% but that means it almost completely evaporated in December given the steep slowdown from an average of 24.5% in the first 11 months of the year. The market had looked for a dip to 24.1%. But this can be reversed relatively easily, by easing the crunch on credit from sky-high reserve requirements and lending curbs, and IFR expects another cut in the SRR in short order.”

He added that "Meanwhile, more broadly speaking and helped by sluggish external demand, the economy is coming back to earth after exceptionally strong growth in 2010 and early 2011 with GDP expected to expand by around the government perennial 8% target in 2012."

Mr Hua Zhongwei analyst with Huachuang Securities in Beijing said "The slowdown is quite modest, and the overall situation of the Chinese economy is stable. It's almost certain now that China's economic growth will touch a cyclical bottom in the first quarter of 2012 before rebounding in the second quarter.”

He said that "According to our field studies, demand for heavy equipment and machinery is recovering, and that is a very good sign for the economy."

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