How to read 6.1?
China's GDP growth of 6.1 percent for the first quarter has been both lauded as proof that China's recovery is on track and taken as evidence that China's massive stimulus package has failed.
Fourth quarter growth in 2008 was 6.8 percent, and the government has staked its legitimacy on an overall growth rate of 8 percent for 2009. The World Bank is predicting 6.5 percent.
China provides year-on-year rather than quarter-on-quarter comparisons for GDP growth. According to estimates by Goldman Sachs and JPMorgan, if it did, first quarter growth would actually have risen to 5.8 percent from 2.2 percent in the fourth quarter of last year.
This would indicate a sharp growth, and is being taken by many economist as proof China will keep growing depsite the world slump.
But China does provide a breakdown of where its growth originates. The 6.1 percent growth figure can be broken down as follows, compared against 2008 figures for growth over the entire year.
Fixed asset investment: 2 percent growth (2008 full year: 4.2 percent)
Consumption: 4.3 percent growth (2008: 4 percent)
Exports: Minus 0.2 percent growth (2008: 0.8 percent)
The good news was that consumption speeded up. This was mainly due to a drop in the price in consumer goods and food, partly a result of increased supply thanks to the shrinking export market. However consumption currently only makes up about 20 percent of China's GDP.
While exports - which make up 40 percent of GDP - slowed by a clear percentage point, it was fixed asset investment growth that slowed down much more significantly by 2.2 percent.
Investment, like exports, also makes up for about 40 percent of China's GDP. However it's not clear to what extent fixed-asset investment in previous years has come as a trickle-down effect from China's export growth.
Some economists argue that although the quantity of China's exports are huge, their value is generally very low and only 8 percent of China's workforce is directly employed in export industries.
China's real estate industry looks set to increase revenues over the next year as more property developers are forced to release their inventories onto the market. But with predictions that house prices may halve in two years, it is unlcear how much of this will translate into tangible growth.
The question now is how much of the RMB4 trillion stimulus package can be transferred into fixed asset growth?
Currently no-one is sure exactly who's hands the stimulus money is in and how it is being spent, least of all the China Banking Regulation Commission, which is currently introducing measures to try and make sure the money doesn't end up being punted on the stock market.
Other Shandong sooth articles
- The trouble with Chinese real estate
2009-03-11 - April data not much to cheer about
2009-05-14
