By Bloomberg News
Sept. 28 (Bloomberg) -- China’s government stimulus may risk overheating some parts of the economy as local authorities rush to expand fixed-asset investment, said Qu Hongbin, chief China economist at HSBC Holdings Plc in Hong Kong.
“Local governments in China have laid out massive investment plans this year and with an explosion of bank loans funding the construction, overheating in some areas and price increases in raw materials may be on the horizon,” Qu said in a phone interview. “How to address the unbalanced recovery will be a test for the government,” said Qu.
Premier Wen Jiabao’s 4 trillion yuan ($586 billion) stimulus package to build airports, power grids, roads and low- cost homes is driving the world’s third-largest economy out of the steepest slump in more than a decade. Still, Wen said this month that his government “cannot and will not” halt stimulus because the nation’s economic rebound isn’t yet solid.
China’s factory output climbed the most in a year last month, retail sales had the biggest gain this year and urban fixed-asset investment accelerated in the first eight months on government stimulus. In the meantime, exports fell for a 10th straight month, plunging more than economists estimated.
Fixed-asset investment jumped 51.9 percent in both north China’s Hebei Province and the southern province of Guangxi in the seven months through July, the highest among China’s 31 localities and 19 percentage points better than the nation’s average, according to the government.
House Prices
Local authorities may have planned more than 10 trillion yuan of investment projects, according to a UBS AG estimate.
House prices in 70 Chinese cities rose at the fastest pace in 11 months in August as construction and sales accelerated, raising concern that asset bubbles may be inflating in the wake of $1.2 trillion of lending this year. A central bank survey showed last week that more than 65 percent of Chinese households consider home prices “too high.”
Consumer prices have fallen for seven months this year and producer prices dropped 7.9 percent, government reports show.
Faltering overseas sales have left Chinese industries with overcapacity, which has contained price increases for goods and raw materials, HSBC’s Qu said. “A big swing factor, if China will see overheating across-the-board and elevated inflation next year, is how the global economy recovers, thus how fast China exports will recover,” he said.
“If the global economy recovers faster than expected, China’s growth, which is already well supported by domestic consumption and investment, may top 10 percent next year, with extra contribution from exports,” said Qu. “At a growth rate of more than 10 percent, inevitably there would be the risk of overheating.”
--Li Yanping. Editors: John McCluskey, Michael Dwyer
To contact Bloomberg News staff for this story: Li Yanping in Beijing at +86-10-6649-7568 or yli16@bloomberg.net
Posts
No comments:
Post a Comment