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China Economic Focus: February 2012

BritCham / CBBC
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The British Embassy in Beijing has kindly published the lastest China Economic Focus for February 2012.

  • The economy grew by an overall 9.2 percent in 2011 but the rate of growth slowed throughout the year. The National People’s Congress are expected to set out a growth target of below 8 percent when they meet in March, which would be consistent with the 12th 5 Year Plan and lower than the current IMF and World Bank forecasts for 2012
  • Despite a temporary uptick in January, inflationary pressures continue to fall. The headline consumer price index is expected to fall below 4 percent soon. The producer price index fell for a sixth consecutive month.
  • Lower inflation gives the authorities more space for monetary easing. On 18 February the People’s Bank cut the required reserve ratio by 0.5 percentage points. This was probably triggered by a recent slowing of liquidity in the financial system, as shown by lower than anticipated lending figures for January.
  • Property prices continue to moderate. All of the 70 large cities regularly monitored by the National Bureau of Statistics reporting flat or falling prices on a monthly basis. But the size of price falls experienced so far is not seen as a cause for concern.
  • Both exports and imports contracted in January but Chinese New Year will have distorted the figures. That said, China remains vulnerable to a slow-down in external demand and this month the IMF forecast that a severe downturn in Europe could reduce Chinese headline growth by 4 percentage points.
  • The RMB has remained basically stable over the month. Most analysts expect a 3-4 percent appreciation over 2012. The People’s Bank re-iterated their support for a gradual opening of the capital account.
  • The World Bank and the State Council’s Development Research Centre published a detailed strategy for China’s development to 2030, with far-reaching macroeconomic recommendations concerning the reorientation of fiscal expenditure, the reforming of enterprise policy and the liberalisation of factor prices (capital, land, labour and energy).
  • Due to Chinese New Year, the National Statistics Bureau publishes some data readings for January and February together in March. This note therefore lacks new data on retail sales, industrial production and fixed asset investment.

The full report can be found in the attached PDF document

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