More Economist Upgrades For China's GDP Growth

Posted by: Frederik Balfour on June 25, 2009

Signs that China’s economic recovery is gaining speed have led to a flurry of optimistic revisions to GDP growth forecasts in the past week. First the World Bank upped its estimate for Chinese economic growth to 7.2% as against its March forecast of only 6.5% growth for this year. A few days later, the OECD weighed in with a prediction of 7.7%, versus a 6.3% figure three months ago. Credit Suisse is calling for 8% growth this year and 9% in 2010. [And for our many readers who come blogs on China for Indian content, Credit Suisse is calling for 6.2% and 7.4% growth of the Indian economy in 2009 and 2010.]

Evidence of strength abounds. Sales of automobiles have soared this year, a situation Detroit executives must look at with longing and envy. Auto sales in China climbed 14% in the first five months to nearly 5 million and the market could reach 11 million units this year. Encouraging too for the environment, is the fact that much of the growth came from smaller engine, fuel sipping autos.

More importantly, China’s property sector is rebounding faster than most had predicted. That’s one big reason why Standard Chartered Bank upped its growth forecast from 7.4% from 6.8%. Housing prices dropped sharply across the country starting last September, and sales volume slowed to a trickle. By early February sales volume picked up dramatically, and residential floor space sold in the first five months is up 27%.

What’s more prices have not only stopped falling but in cities like Shanghai they are picking up, contrary to expectations just a couple of months ago of a lousy year. Remarkably, not a single major property developer went bust during the downturn, helped in part by a massive injection of money into the economy by the government so far this year to goose the economy. Property accounts for about 25% of fixed asset investment, and a principal vehicle for Chinese to hold their wealth, so a buoyant market is good news for construction materials suppliers, makers of appliances and home furnishings manufacturers.

I must admit, somewhat sheepishly, to deriving a certain amount of satisfaction that things are turning out better in China than most people believed they would. Back in December I went fairly far out on a limb saying that China’s economic travails late last year marked the beginning of the end for China’s economic slump. Let us not forget that China is now the world’s third largest economy, and while it may still export a heck of a lot more than it imports, the world would be a lot worse off if it were shrinking, not growing.

Reader Comments

dw

June 25, 2009 9:49 AM

would these economists be the same ones that missed the great recession even though it was staring them in the face? if so, i seriously doubt we should have much faith in their forecasts. maybe we should expect a major down turn in China instead given their history of reliability.
i guess they see China sprouting a consumer based economy in spite of the 20000 businesses that have collapsed. to make up for their lost trade sales

sumd

June 25, 2009 1:11 PM

Not only are these the great economists that missed the great recession but they are the same bunch that consistently downgrade China's performance over the years. So if these time they are upgrading China's performance, they are doing it because their credibility is very much at stake. Dw, you seem like a sour grape.

Joe

June 26, 2009 1:29 PM

Well according to Times fo India and all the top analysts in India thinks INdia will grow probably anywhere from 9-15% this year. So India's economy is much bigger than China therefor it is probably the second biggest economy in the world. Another 10 years it will definitely be number 1.

taishan

June 26, 2009 2:08 PM

Actually, the 8% and 9% growth for China in 2009 and 2010 doesn't surprise me. China is often referred to as the world's "third" largest economy. I personally believe it's already the second largest economy in the world with Japan's economy contracting the last part of 2008 and significantly this year.

Did the economists read that in a fortune cookie?

June 26, 2009 3:56 PM

Joe, I hope you are joking otherwise please go do some serious reading. Your post is so far off base it's not even worth commenting on. Beyond retardation.

I have my doubts about China's growth. It's just too big, too complicated...for every economist that says things are looking up, there is another that "cautions" the brighter outlook. Economists are becoming like fortune tellers, with about the same amount of credibility.

peter

June 26, 2009 4:33 PM

India's the second largest economy? Are you day-dreaming? India's GDP in 2008 is

1 United States 14,264,600
2 Japan 4,923,761
3 China 4,401,614h
4 Germany 3,667,513
5 France 2,865,737
6 United Kingdom 2,674,085
7 Italy 2,313,893
8 Russia 1,676,586
9 Spain 1,611,767
10 Brazil 1,572,839
11 Canada 1,510,957
12 India 1,209,686
Wake up, dummy.

Pointer

June 26, 2009 4:40 PM

Bad news is Credit Suisse called for 8% growth. Wonder how many have followed Credit Suisse track record of forecasting. For that, when Credit Suisse call "buy", better put in sell order, and do the likewise when it come to calling sell.

DanTe

June 26, 2009 6:13 PM

I see. Real estate is on the upswing in China. That's why even more buildings are standing empty in their cities. And economic growth must be booming. I keep seeing workers standing in the streets after their factories had just shut down without paying months of wages. I must apologize than for my pessimistic appraisal of China's economy. It must be boom times there right now.

C. H. Ng

June 26, 2009 9:15 PM

@Joe....another take on China versus India kind of thing?
Hey man...this is getting tiring and silly. How about a change like India versus Japan or Russia or Brazil??

Nevertheless, to brag openly about India becoming No.1 in 10 years time is like predicting a total demise of USA within the same period. If ever India can achieve that high (or much), all the best to her; if not, a more humble prediction of, say, within the top 5 would be a more less sore in the a** for us readers to hear.

Joe

June 27, 2009 1:25 AM

Well, not only is Times of India saying this. According to Huyu, India is already the world's largest economy in PPP terms. And Huyu is Chinese, is he not? If he is saying it, it must be true.

Frederik Balfour @ Joe

June 27, 2009 4:21 AM

Joe:
It seems to be that you are confusing growth rates with absolute GDP figures. Even using Purchasing Power Parity measures of GDP, India has a lot of catching up to do.

This is from the CIA World FACT BOOK

https://www.cia.gov/library/publications/the-world-factbook/rankorder/2001rank.html

Rank country GDP (purchasing power parity) Date of Information



1 European Union $ 14,820,000,000,000 2008 est.

2 United States $ 14,290,000,000,000 2008 est.

3 China $ 7,800,000,000,000 2008 est.

4 Japan $ 4,348,000,000,000 2008 est.

5 India $ 3,267,000,000,000 2008 est.

6 Germany $ 2,863,000,000,000 2008 est.

7 United Kingdom $ 2,231,000,000,000 2008 est.

8 Russia $ 2,225,000,000,000 2008 est.

9 France $ 2,097,000,000,000 2008 est.

10 Brazil $ 1,990,000,000,000 2008 est.

HKJ to Joe

June 27, 2009 5:42 AM


Now i know who is Hu Yu, hha

And if you like to hear this kind of words, i can make you happier:
India is the No.1 supre power in the world.
India is the No.1 econony of the world.
Indian people are the richeast people in the world.
India is the No.1 in military and technology also in the world.
.........
and..China is nothing.
are you happy now?
by the way, i am a Chinese, and i like India, especially the music.

Ronald

June 27, 2009 5:54 AM

Economic is an art not science. It says it all.

The Future

June 27, 2009 4:17 PM

GDP and Population projections for the year 2050, from Wikipedia:

1. China, GDP: $70.7 Trillion, pop: 1.4B
2. USA, GDP: $38 Tr, pop: 400M
3. India, GDP: $37 Tr, pop: 1.8B
4. Brazil, GDP: $11 Tr, pop: 200M
...(Mexico, Russia, Indonesia)
8. Japan, GDP: $6.6 Tr, pop: 93M

World Bank Projections:
- China will overtake the US and become the world's largest GDP in 2020.
- India will overtake China in population in the year 2030.

Demorgraphy is the key

June 27, 2009 8:43 PM

The greater India (ind,pak,bg) has a higher population than that of greater China (PRC, taiwan,singapore). GI has 2000+ ethnic groups versus China's 56. Just as a comparison, 95% of China's population is Han, so China's population is very uniform, thanks for its first emperor Chin who united the majority of the country 2000 yrs ago. China was able to absorb the Mangolians, Mantrurians in during the next 2000 yrs (the major non-Han populatin in China today are Koreans, Uyghur(Turkish), Tibetan), but as whole its nation IQ is 103. India's most intelligent ethnic group is compareable to Han, but these group are small compared to its huge overall population, the majority of India;s population has a IQ similar to the heart of Africa, thus India's national IQ average is just 83. This will seperate India from China or EU/USA/Japan/Korea forever.

Economics of demorgraphy

June 27, 2009 8:46 PM

The greater India (ind,pak,bg) has a higher population than that of greater China (PRC, taiwan,singapore). GI has 2000+ ethnic groups versus China's 56. Just as a comparison, 95% of China's population is Han, so China's population is very uniform, thanks for its first emperor Chin who united the majority of the country 2000 yrs ago. China was able to absorb the Mangolians, Mantrurians in during the next 2000 yrs (the major non-Han populatin in China today are Koreans, Uyghur(Turkish), Tibetan), but as whole its nation IQ is 103. India's most intelligent ethnic group is compareable to Han, but these group are small compared to its huge overall population, the majority of India;s population has a IQ similar to the heart of Africa, thus India's national IQ average is just 83. This will seperate India from China or EU/USA/Japan/Korea forever.

pointer

June 28, 2009 2:29 AM

PPP is just another convenient tool for statistician to manipulate the number, and nothing could substitute GDP method.
When you lie in GDP number, you could find the proof. But when you lie in ppp, you could find all kind of justification and can not find any proof. PPP just a joke.

tell truth

June 28, 2009 8:15 AM

china is on its way to take over Japan as the world second economy because Japan is having negative growth this year. so China can become the second in the world early next year. next decade will belong to Asian countries because they learn the lesson from 1998 asian financial crisis. they fixed their bank sector and accumulate big reserve. they also have high saving and less levy.US world domination will decline and china will resume its world superpower status in not too distant future.

Andy

June 28, 2009 11:27 AM

Even when the whole predicted that China will collapse last year, I was optimist as usual of China. It was not the first time the media predicted wrong about China, and certainly not the last time too. China has huge reserves, the government budget is healthy, the people has huge savings and little debts, but more importantly the government acted fast to response to the crisis and the people are confident of their country. I don't think that kind of country will fail.

laughs

June 28, 2009 12:06 PM

Hey, Guys. Ignore this Joe. He does not know what he is talking about. Hu-Yu in Chinese means "to flatter, to intoxicate, and to make not real". The name tells it all.

Taishan

June 28, 2009 5:20 PM

To Pointer: PPP balances out GDP. Both numbers should always be taken into consideration. PPP often becomes a point of debate and contention, especially when talking about China. But lets take Japan in the 1980's. Japan's per capita GDP was one of the highest in the world with only Switzerland having a higher per capita GDP. Yet, it was clear that Japan did not have the highest standard of living in the world and was comparable with the UK, which at that time, had a per capita that was about 2/3 of that of Japan. Also, countries like Canada and Australia had a much lower per capita GDP than Japan, yet had higher standards of living and purchasing power. GDP, is based not only on what is produced by a nation, but also the flow of capital as well (whether into or out of a country and or market(s)). Markets such as real estate, equities, government bonds, etc. So PPP figures are not trivial. China's flow of capital is very controlled. There's no telling what would happen if those controls were significantly loosened. China's GDP could go up or down significantly. Hard to say what it would do now, but China is timing it's capital controls to ensure that it's GDP goes up.

pointer

June 29, 2009 12:40 AM

Jounalist turn "Economist" offten abused the convenient of PPP just because it is no clear-cut equation to measure what a nation produce. It is still depend on the GDP, and from there to adjust the number. This is why you see PPP is all over the place in decrisbing a nation's citizen standard of living.

David

June 29, 2009 11:39 AM

What is up with Indians trying to make themself seem like the're much better off than the Chinese? I see it all the time and I don't get it?

I have been to both China and India and the difference are very dramatic. On paper, China is almost four times larger economically than India, but having visited Shanghai and Mumbai makes me believe that China is more developed than India.

So is it lack of self confidence on behalf of Indians? The dislike of Chinese because of the war in 1960's? China's support of Pakistan? I see this quite common in Indian publications where they pick on China and also posting like the ones you find here and economist.com.

Just an American trying to understand rivalries in Asia (I would think China and Japan would be worse!)

Andy

June 29, 2009 11:42 AM

When time was good, these so called western trained "economists" predicted that China will collapse from overheating soon. Then global crisis struck their own countries in the west, and suddenly they changed their tones. Then they said that China would have collapsed from slower growth. Now after the Chinese proved the "experts" wrong again, they "updated" their new forecasts. Not so much for an experth, huh?

jcage

June 29, 2009 2:21 PM

Andy

Those economist experts were not able to see first the Dot.com bubble and then the real state bubble and both bubbles took 4 to 6 years to built themselves into the huge bubbles! Pray tell, how can those experts understand what is going on in China since China is growing at incredible speed for a country of its size and population?

C. H. Ng

June 30, 2009 1:17 AM

People can say whatever they like about China's economy but as far as I am concerned, I already made up my mind about finding my pot of gold there in another one or two years time. You may think it's very surprising such planning came from an oversea Chinese (I am a Malysian Chinese btw) when so many mainland Chinese are going the other way (abroad) to find works to support their families back home in China.

As for Mr Joe, who is this "Hu-Yu" by the way? I don't know any Chinese great by this name. Hu Jintao, yes. Deng Xiaoping, yes. But Hu-Yu??

Taishan

June 30, 2009 2:33 PM

To Andy: If people were really impartial, they would see that China is clearly on the road to becoming a developed nation. And it starts with the basics of infrastructure. No other country on earth builds infrastructure with such decisiveness and speed. (Except Dubai, of course, but then, they're not on a scale of China (just more opulent :)). And the Chinese government has a good macro level view of economy and is planning for better times ahead. Look at the ports in Shanghai. They're forging ahead to expand the ports there even though the shipping industry has collapsed. Shanghai and China is planning for better days ahead. And North of Shanghai, they are still planning to build the world's largest shipyard, even though ship orders have nearly dried up. This current global downturn is good for China in that they can increase their focus on expanding railways, airports, freeways, subways, ports, etc. By 2020, I'm convinced much of China will begin to ressemble a developed nation, even though they will not be classified as one by then. And the equities market will continue to grow up to and beyond 2020. My bet is that China's nominal GDP will be the largest in the world by 2020.

Taishan

June 30, 2009 2:42 PM

To Point: PPP maybe all over the place, but I do believe it is a worthwhile goal to achieve. One only has to look at the comparison between China and Japan today. Everything from energy to natural resources is consumed in greater quantities in China than Japan. And in some areas, by quite a wide margin, i.e., energy and building materials. However Japan's and China's nominal GDP are about equal. However, in PPP, China is about twice that of Japan. And I believe that PPP is a closer reflection of what the two nations are producing and consuming.

R.H.

July 6, 2009 1:22 PM

It is exremely ignorant to predict China's GDP in 50 years so prematurely. Alot can happen in 50 years, and if you were to go back 50 years ago, China was alomst a third world country. If someone predicts what their GDP will be in 10 years, it might be accurate, but 2050? Now that's jumping the gun a little.

FRITES Sayah

July 19, 2009 3:49 PM

je donne confirmation investors.

Ketan

September 15, 2009 11:40 AM

@Economics of demorgraphy
brother u talking on IQs ...Indians are far better with brains and that is why you find them all over the world and that is one reason why India's economy is growing. Chinese are sell goods to grow their economy. Indians sell brains for their economy because they have it!!!

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