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China's economy bottoms out

23/04/2009

If the latest slew of positive data is an indication, then the worst might be over for the one of the world's biggest economies.

CommSec reported that the Chinese economy grew by 6.1% in the March quarter - the weakest pace since 1991. However, industrial output expanded at an annual rate of 8.3% in March, up from 3.8% in the year to January/February period. Fixed asset investment such as spending on roads and power plants also grew at an annual rate of 28.6% in March, the fastest growth since August 2006. In addition, CommSec noted that urban fixed asset investment jumped by 30.3% on a year ago in March.

Craig James, chief economist with CommSec said the data suggest that China's economy may have reached the bottom.

"The March quarter looks to be the low point for the Chinese economy. But the latest figures on production, investment, and trade are encouraging, pointing to stronger growth, not just for China, but the Asian region. With the Chinese economic growth appears to have hit bottom, the sharp recovery in lending and investment is good news for Australia, Asia more broadly, and for the global economy. Chinese authorities are committed to keeping investment growing at a fast clip, underpinning demand for Australia's key commodity exports like coal, iron ore and base metals," he said.

Shane Oliver, chief economist with AMP Capital Investors is predicting that China's economy will grow at a healthier pace this year despite the gloomy forecasts by some experts.

"GDP growth this year is looking increasingly likely to come in around 7%, as opposed to sub-6% numbers that were starting to be bandied around. This is growth that most countries only dream about in best of times!" said Oliver.

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