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Wednesday, December 10, 2003

No Sign of China Cooling Off

Well according to these numbers the forecasted 'cooling off' in China has yet to show its face. Of course, and in fairness to Andy Xie, this is supposed to happen around the second quarter of 2004. I think the jury is still out on this. I am also non-commital on the 'overheating. Clearly the laws of gravity still apply, but nothing this big has ever happened before, and certainly not so quickly, so I think caution is the word. In a way the possible slowdown all depends of the capacity of Beijing to reign-in credit expansion, and that has to be an unknown quantity. The China role-out has a much bigger 'bottom up' element than anyone seems to recognise, and there is no guarantee that they can control things. Capitalism is like that.

China's industrial production in November surged a higher-than-expected 17.9 per cent year on year, adding to evidence that demand for steel and raw materials in the world's fastest growing major econony continued unabated.

Value-added industrial output, China's key measure of factory production, increased in November to Rmb396.6bn mainly on demand for cars and mobile phones, the State Statistical Bureau said on Wednesday. Analysts had expected a rise of 17 per cent year on year.

November's figure was the highest since February, when China's manufacturing sector recorded 19.8 per cent year-on-year growth, and also exceeded the 17.2 per cent growth rate in October.

For the first 11 months of the year, industrial output expanded 16.8 per cent year on year to Rmb3,669bn.

Production of cars and mobile phones - retail items heavily sought by China's growing middle class - surged 71.6 per cent and 24.5 per cent, respectively, reflecting both the strength of the country's exports and demand driven by consumer spending.

The latest data is certain to heighten concerns that China's economy, which is projected to grow more than 8 per cent this year, is overheating. In November, China reported a 40 per cent year-on-year rise in imports to $35.2bn, setting the country on course to eclipse Japan as the world's third largest importer behind Germany and the US.
Source: Financial Times

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