Want to see where all our money is going?
As America sinks under the weight of trade deficits, budget deficits, and a war whose cost is rapidly reaching the point where we could have developed a new energy source instead of trying to steal oil, another country reaps the benefits of our stupidity. Seems like communism is really working out for somebody. Note the paragraph on "Fixed Asset Investment rising 21%". That translates to "your job going to China."
China sees sweltering 9.5% growth
GDP above estimates, no plans to ease cooling measures; wants more time before yuan adjustment.
January 25, 2005: 6:44 AM EST
BEIJING (Reuters) - China's economic growth sped up to 9.5 percent in the year through the fourth quarter, but a senior official dampened speculation Tuesday of any imminent currency revaluation or interest rate rise to curb the rampant economy.
The strong figure, exceeding expectations for an 8.6 percent expansion, led chief statistician Li Deshui to signal there would be no let-up in the campaign to restrain growth.
"We will strengthen and improve macro-economic controls and keep controls on credit and land," he said.
But any change to the currency policy would take time and he saw no immediate need to raise interest rates, he later told Reuters in an interview.
"Whether we need to raise interest rates will be based on the economic situation," he said in the interview. "But I can't see any need right now."
The growth figure compared with 9.1 percent in the year through the third quarter and indicated that China's economy was not heading for a sharp slowdown.
China has taken steps, including its first interest rate rise in nine years in October, to try to cool growth for fear heavy investment in key sectors could lead to overheating.
The country's growth rate has become a key issue for financial markets, which view the world's seventh-largest economy as a major driver of the global economy. Investors have worried that China, in slamming on the brakes, would curb demand for imported raw materials, machinery and components.
Gross domestic product for all of 2004 was 9.5 percent higher than a year earlier thanks in part to robust exports and agricultural production, the National Bureau of Statistics said.
That compared with growth of 9.1 percent in 2003 and was the strongest since 1996, when the economy grew 9.6 percent.
"What would economic growth have been like if we had not taken macro-economic control measures last year?" said Li, head of the bureau. "Maybe economic growth would have been much faster. Maybe we would have already seen serious inflation. Maybe we would have faced big ups and downs in the economy."
Currency, interest rates
Analysts said the numbers could put pressure on Beijing to raise interest rates again after its 0.27 percentage point increase last year.
"We think without further rate hikes, the growth is at some risk. The big worry is that real interest rates are still too low," said Ben Simpfendorfer, a JP Morgan economist in Hong Kong.
Adjusting for seasonal patterns, Simpfendorfer calculated the economy had grown at a 12.9 percent annualized rate between the third and fourth quarters, accelerating "markedly" from the 8.4 percent rate it recorded between the second and third quarters.
The United States and others have pressed Beijing to allow its currency, the yuan, to move more freely, saying the current level of 8.28 to the dollar makes Chinese exports unfairly cheap.
A stronger exchange rate would also help restrain growth.
But Li said: "China doesn't have conditions to adjust the renminbi (yuan) exchange rate at present."
Li's comments caused the premium for one-year non-deliverable yuan forwards to narrow about 6 percent to 3,750 points on Tuesday, implying an exchange rate of 7.9 per dollar in 12 months' time. Analysts also cited it as a factor in trading of the dollar, yen and euro.
Some analysts think China may adjust its exchange rate in the second half of 2005, especially if consumer price inflation rebounds. It fell to 2.4 percent in the year through December after hitting a seven-year high of 5.3 percent in the year to August.
Widely watched fixed-asset investment was 21.3 percent higher in December than a year earlier, the government said. That was its slowest pace in seven months, but Li said China needed to be alert for any rebound, an assessment several analysts agreed with.
Lehman Brothers economist Rob Subbaraman saw evidence that the economy was becoming better balanced.
"It does look like investment has slowed down through 2004," he said. "Part of the strength reflects also the pick-up in consumption and also robust exports, and that's good. I don't think the take from this number should be 'oh no, the economy is roaring away again, overheating'."
However, economists are skeptical of the reliability of much Chinese economic data, including GDP. The government is trying to improve its statistics.
Growth of producer prices eased to 7.1 percent in the year through December from 8.0 percent in the year through November. Industrial output was up 14.4 percent, showing its slowest pace since the year through May 2003.
"The government will continue to use monetary tools as well as administrative measures to rein in investment," said Vincent Kwan, chief economist with Hang Seng Bank in Hong Kong. "We expect if the economy does not slow significantly, interest rates will go up in the first half."
Retail sales rose a higher-than-expected 14.5 percent in the year through December. Their recent strength has prompted optimism that consumption can take up some of the slack from falling investment growth.
Recall that earlier generations faced down fascism and communism not just with missiles and tanks, but with sturdy alliances and enduring convictions. They understood that our power alone cannot protect us, nor does it entitle us to do as we please. Instead, they knew that our power grows through its prudent use; our security emanates from the justness of our cause, the force of our example, the tempering qualities of humility and restraint.
-President Barack Obama, 1st Inaugural address