By Xinhua writer Lin Jianyang
BEIJING, April 1 (Xinhua) -- Over the past month, China has been
producing a series of tepid macro economic data. Financial
headlines have barely been short of disappointing. Signs are
pointing to the fact that the world's second largest economy is
slowing down.
The latest evidence could be found in the HSBC manufacturing
purchasing managers' index (PMI), a key measure of factory activity
in China. The official PMI reading repeats the same message.
The two PMIs, both released on Tuesday, are among the earliest
available indicators to gauge the country's manufacturing sector
operating conditions in the first quarter.
The official PMI for March, compiled by the National Bureau of
Statistics and the China Federation of Logistics and Purchasing,
edged up 0.1 percentage points from February to 50.3. The reading,
the first rise since November, is just above 50 -- the
expansion/contraction watershed.
The HSBC/Markit PMI, which sampled small- and medium-sized
enterprises, dipped to an eight-month low of 48 in March, from a
final reading of 48.5 in February. It also signals the sharpest
fall of output since November 2011.
In fact, many economic figures released so far this year --
including industrial production, fixed asset investment and housing
sales for the first two months -- were all weaker than
forecasts.
For instance, industrial production growth in the Jan.-Feb.
period dropped by 1.4 percentage points to 8.6 percent year on
year. This is the lowest reading since April 2009.
Apart from lukewarm macro data, media reports over possible
corporate defaults by two companies in East China -- Shanghai
Chaori and Zhejiang Xingrun -- added to concerns over credit
defaults and shadow banking.
Indeed, it is fair to say there is an economic slowdown. But
there will be no "Minsky Moment" for China as some Western
economists claim.
The phenomenon is named after late U.S. economist Hyman P.
Minsky, who claimed that periods of rising asset valuation lead to
speculation with borrowed debt, only to end in crisis.
This term sounds familiar. Like "Lehman Moment" and "Bear
Stearns Moment", it is another American financial crisis lexicon
which a few Western economists have borrowed to describe
"difficulties and risks" faced by the Chinese economy, as Chinese
Premier Li Keqiang put it.
While it might be too early to say that China could achieve its
annual growth target of 7.5 percent, and there might be additional
defaults of individual financial products, fears of a Minsky Moment
are overstated.
China is not liable to any systemic financial risks given the
Chinese government's strong fiscal capacity, the banking system's
ample domestic funding, and state ownership interest in banks.
For China's economy, improving external demand and solid
domestic consumption are sources of support for growth. Deepening
reforms are also expected to inject dividends into the economy.
China's real exports in 2014 are set to recover on the back of
better growth in the United States and Europe, despite a relatively
strong Renminbi and weak emerging markets. Fast increase in the
sub-index for new export orders in March's HSBC and official PMIs,
both of which stayed above 50, testified to this.
Exports, along with consumption and investment, have been one of
the three main drivers for China's growth. External demand supports
about 12 percent of the country's GDP and absorbs some 35 percent
of industrial output.
Economists believe that net exports are expected to contribute
positively to China's GDP growth in 2014, for the first time in
four years.
Consumption is predicted to see firmer growth this year since
base effects become more favorable a year after public consumption
controls. Moreover, steady wage growth and the expansion of the
social security network are set to support private consumption.
The government's reform measures, as promised, could be growth
supportive if they help improve efficiency. Over the past 30 years,
economic reforms have been able to boost China's GDP and its
potential significantly.
It is also worth mentioning that China's economy sometimes
marches to the beat of its own drummer. Economic activity in the
beginning of the year tends to be slow and macro data are often
distorted by the Chinese New Year holiday. So, economists should be
cautious when using them to predict the rest of the year.
Enditem
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