China Growth Will ‘Pick Up’ in Second Half, Rio Says

By Rebecca Keenan and Jesse Riseborough

March 4 (Bloomberg) -- Growth in China, the world’s third largest economy, will “pick up” in the second half as the government’s 4 trillion yuan ($585 billion) stimulus package takes effect, according to Rio Tinto Group.

“We are looking for more economic activity in China,” Vivek Tulpule, the chief economist at London-based Rio, said today in an interview in Canberra, Australia. “It is important for the industry to see that improvement.”

China, in the midst of the worst slump in more than a decade, will likely recover in the first half and the government is confident of achieving its 8 percent growth target, officials said yesterday. Rio, which agreed to a $19.5 billion capital injection by state-owned Aluminum Corp. of China last month, relies on China because it’s the world’s biggest metals consumer.

“China will pick up in the second half of this year as the stimulus package” begins working, Tulpule earlier said at the Australian Bureau of Agricultural and Resource Economics conference. “We will see some small improvement in our markets towards the end of this year.”

Rio dropped 2.7 percent to A$42.84 at 10:40 a.m. Sydney time on the Australian stock exchange. The stock has gained 12 percent this year.

China may double the spending plan after economic growth cooled to the weakest pace in seven years and 20 million migrant workers lost their jobs, according to Standard Chartered Bank Plc. Metals prices slumped 49 percent last year, according to the London Metal Exchange Index of six metals.

Earnings, Debt

Earnings at Rio, the second-largest producer of iron ore and aluminum, and rivals including BHP Billiton Ltd. may drop as a slump in demand for metals cuts prices.

Iron ore prices may drop 30 percent, the first decline in seven years, from April as the global recession crimps demand for cars and buildings, according to the median estimate of eight analysts surveyed by Bloomberg News. Iron ore accounts for nearly one-third of Rio’s sales.

To contact the reporters on this story: Rebecca Keenan in Melbourne at rkeenan5@bloomberg.net; Jesse Riseborough in Melbourne at jriseborough@bloomberg.net;