by Kevin Hamlin
Feb 13 (Bloomberg) — “China looks set to be the first major economy to recover from the current global meltdown,” said Lu Ting, an economist with Merrill Lynch & Co. in Hong Kong. “China is the only economy in the world to see significant growth in credit to corporate and household sectors after September 2008, when the financial crisis worsened to a near collapse.”
State owned banks lending without all that much regard to credit quality functions like a fiscal transfer.
The government’s stimulus plan, announced in November, is beginning to gather momentum. Projects such as the building of 3.5 billion yuan of public houses in Shaanxi province and Shanghai began in December, while Shandong province started work on three new railway lines the same month.
China is committing about 1.2 trillion yuan of central government funds to the plan, which means banks’ willingness to fund projects is crucial. So far they are responding.
Housing construction is real investment.
Growth will accelerate from the current pace to 7.2 percent for the full year, according to Wang Qian, an economist with JPMorgan Chase & Co. in Hong Kong. Her calculation is that consumption will contribute 4.4 percentage points and investment 4 percentage points. The collapse in exports will slice off 1.2 percentage points.
Stimulus spending will contribute up to 3 percentage points of the total, she estimates.
Still low growth for China.
China’s imported iron ore has climbed 28 percent to 690 yuan per metric ton since the end of October. Hot-rolled steel has surged 41 percent from Nov. 13 to 4,027 yuan per metric ton. The Baltic Dry Index, a measure of shipping costs for commodities, has more than doubled since Jan. 28.
“You are starting to see the underlying demand of the Chinese economy,” BHP Billiton Ltd. Chief Executive Officer Marius Kloppers said Feb. 4. “We have seen in the steel business in China that the de-stocking cycle is almost complete and that means people are coming back into the market and buying.”
BHP Billiton is the world’s third-largest producer of iron ore. China is its largest consumer.
The post-Olympic lull is over?