Friday, 19 August 2022
Meet the JournalistsPremiumAucklandWellingtonCanterbury/South Island
CrimePoliticsHealthEducationEnvironment and ClimateNZ Herald FocusData journalismKāhu, Māori ContentPropertyWeather
Small BusinessOpinionPersonal FinanceEconomyBusiness TravelCapital Markets
Politics
Premium SportRugbyCricketRacingNetballBoxingLeagueFootballSuper RugbyAthleticsBasketballMotorsportTennisCyclingGolfAmerican SportsHockeyUFC
NZH Local FocusThe Northern AdvocateThe Northland AgeThe AucklanderWaikato HeraldBay of Plenty TimesHawke's Bay TodayRotorua Daily PostWhanganui ChronicleStratford PressManawatu GuardianKapiti NewsHorowhenua ChronicleTe Awamutu Courier
Covid-19
Te Rito
Te Rito
OneRoof PropertyCommercial Property
Open JusticeVideoPodcastsTechnologyWorldOpinion
SpyTVMoviesBooksMusicCultureSideswipeCompetitions
Fashion & BeautyFood & DrinkRoyalsRelationshipsWellbeingPets & AnimalsVivaCanvasEat WellCompetitionsRestaurants & Menus
New Zealand TravelAustralia TravelInternational Travel
Our Green FutureRuralOneRoof Property
Career AdviceCorporate News
Driven MotoringPhotos
SudokuCodecrackerCrosswordsWordsearchDaily quizzes
Classifieds
KaitaiaWhangareiDargavilleAucklandThamesTaurangaHamiltonWhakataneRotoruaTokoroaTe KuitiTaumarunuiTaupoGisborneNew PlymouthNapierHastingsDannevirkeWhanganuiPalmerston NorthLevinParaparaumuMastertonWellingtonMotuekaNelsonBlenheimWestportReeftonKaikouraGreymouthHokitikaChristchurchAshburtonTimaruWanakaOamaruQueenstownDunedinGoreInvercargill
NZ HeraldThe Northern AdvocateThe Northland AgeThe AucklanderWaikato HeraldBay Of Plenty TimesRotorua Daily PostHawke's Bay TodayWhanganui ChronicleThe Stratford PressManawatu GuardianKapiti NewsHorowhenua ChronicleTe Awamutu CourierVivaEat WellOneRoofDriven MotoringThe CountryPhoto SalesNZ Herald InsightsWatchMeGrabOneiHeart RadioRestaurant Hub

Advertisement

Advertise with NZME.
Business

Chinese growth back on roll: HSBC

28 Jul, 2014 05:00 PM3 minutes to read
A slowdown in construction in China is seen as a risk to stable growth. Photo / Kenny Rodger

A slowdown in construction in China is seen as a risk to stable growth. Photo / Kenny Rodger

Brian Fallow
By
Brian Fallow

Columnist

VIEW PROFILE
Powerhouse economy has regained momentum after first-quarter scare, says bank’s chief economist for Asia.

Banking group HSBC sees economic growth picking up in China and the momentum continuing into next year.

"In the first quarter we had a bit of a growth scare. Things really looked quite challenging," HSBC's chief economist, Asia, Frederic Neumann, told the Herald.

"But things have improved."

Last week's initial PMI index, an early indicator of manufacturing activity, rose to 52, an 18-month high, suggesting China's mini-stimulus is bearing fruit.

Advertisement

Advertise with NZME.

"Infrastructure in particular has started to pick up and that is helping the growth momentum, and in the second half we should have fairly robust growth," Neumann said.

HSBC is forecasting the Chinese economy to grow 7.5 per cent this year and 7.7 per cent next year.

Neumann does not see the delivery of monetary stimulus whenever the Chinese economy shows signs of flagging as inconsistent with the broader objective of rebalancing the economy away from growth top-heavy in investment spending and towards greater reliance on domestic consumption.

"In many ways having an economy growing at a reasonably stable rate is helpful for the reform process because if things slow down too sharply immediately other concerns take precedence, employment stability for example," Neumann said.

"It's very difficult to go cold turkey on lending on investment in China. It is such a large part of the economy. The best you can hope for is for a very gradual shift away from investment to consumption," he said.

"But the prerequisite for this is structural reforms such as in the state-owned enterprise sector, and to the household registration system, the hukou system."

Related articles

Business

India sells rice reserves to curb inflation

19 Jun 04:30 AM
Business

New Zealand economy rocking on

22 Jun 05:00 PM
Business

Aussie foils RBA as growth rivals kiwi, pound

24 Jun 03:28 AM
Business

Commodity price index takes fourth hit

02 Jul 05:00 PM

Under that system an estimated 15 per cent of the population who live and work in the cities are still officially registered as country-dwellers and are second-class citizens in the cities they now inhabit.

The Chinese Government's declared policy is for markets to play a "decisive role" in the allocation of resources, which implies a willingness to see enterprises fail.

Advertisement

Advertise with NZME.

But it has to proceed gingerly with financial sector liberalisation, walking a fine line between concern about moral hazard on the one hand and risks to financial stability on the other.

"Chinese policymakers have to get some things in order before you see more restructuring, for example a deposit guarantee scheme. The People's Bank of China has indicated that will be up and running in the second half of the year."

Neumann tipped more restructuring next year, involving "the closing of excess capacity and thereby possibly some unemployment".

One risk to the reasonably stable growth outlook HSBC expects China to have is the real estate market.

"That's something policymakers control less directly than, say, infrastructure spending. We have seen prices decline in recent months, and more importantly we have seen a slowdown in construction and developers putting in new projects," he said. "And that's a problem because 20 per cent of GDP is real estate construction. If developers start to hit the brakes that is really an issue."

Neumann said there had been some misallocation of resources - too much housing built in some cities and not enough in others.

Advertisement

Advertise with NZME.

But the process of urbanisation had a lot further to run.

And while a falling rural population would make it easier to consolidate the small land holdings which constituted one impediment to raising agricultural productivity, water constraints were becoming binding, Neumann said.

That leaves a country like New Zealand whose dairy products, for example, are an export of virtual water, well placed.

Advertisement

Advertise with NZME.

Latest from Business

Premium
Business

Cameron Bagrie: Why the role of banks deserves a lot more scrutiny

18 Aug 08:00 PM
Premium
Business

Why Zespri's new US market could help grow China exports

18 Aug 06:28 PM
Premium
Business

The former bankers taking a bite out of the $110 billion business lending market

18 Aug 05:00 PM
Premium
Business

Stock Takes: Fund manager performance fees take a hit

18 Aug 05:00 PM
Premium
Business

Matthew Hooton: It's not easy being Green - what Labour, Nats can learn from Shaw battle

18 Aug 05:00 PM

Most Popular

Premium
'Unbelievable': How Govt crackdown failed to protect women against surgical mesh harm
New ZealandUpdated

'Unbelievable': How Govt crackdown failed to protect women against surgical mesh harm

18 Aug 08:00 PM
Listen: Gaurav Sharma fronts as caucus considers 'motion to expel'
New Zealand|PoliticsUpdated

Listen: Gaurav Sharma fronts as caucus considers 'motion to expel'

18 Aug 07:18 PM
Live: Nature's fury - 400+ Nelson homes now evacuated; rain warnings for Auckland, North Island
New ZealandUpdated

Live: Nature's fury - 400+ Nelson homes now evacuated; rain warnings for Auckland, North Island

18 Aug 07:10 PM

Advertisement

Advertise with NZME.
About NZMEHelp & SupportContact UsSubscribe to NZ HeraldHouse Rules
Manage Your Print SubscriptionNZ Herald E-EditionAdvertise with NZMEBook Your AdPrivacy Policy
Terms of UseCompetition Terms & ConditionsSubscriptions Terms & Conditions
© Copyright 2022 NZME Publishing Limited
TOP