Monday, April 9, 2012

Forget Hard Landing, Is China Already Re-accelerating?

Over the last few months, the markets have been struggling with whether China was headed for a hard landing. The Shanghai Index ($SSEC) recently headed back to 3 year lows on these fears.

What though if China was already re-accelerating? Recent reports on bank lending and inflation suggest that the economy has already hit bottom.

David Carbon, Managing Director of Economics and Currencies at DBS Bank, thinks China hit bottom prior to the start of 2012. Now with the inflation data picking up (March came in at 3.6% vs 3.3% for February) it signals the economy already turning around.

Song Wun of CIMB Research thinks China could expand as much as 9% this year with a target of 8.7%. Remember that the government set an official target of 7.5% though any smart investor should've known this was the lowest possible. Instead, the market sank thinking a hard landing was on the way.

Is it possible that just as the European crisis was much to ado about nothing so could the fears of a hard landing? It appears that after the financial crisis of 2008 every fear will be blown out of proportion.

Time will tell.

Details via CNBC report:

  • Gross domestic product (GDP)  figures to be released Friday may indicate that the economy is expanding faster than the official target of 7.5 percent for 2012, Carbon added. "We look at the broad body of data including GDP, which will be out at the end of this week. China is already re-accelerating again."
  • Inflation  in China came in at a higher than expected 3.6 percent in March, according to government data Monday, after hitting 3.3 percent in February. 
  • China's big four state banks extended almost 300 billion yuan ($47.50 billion) in new local-currency loans in March, the official Securities Times reported on Saturday, citing unidentified sources.
  • Still, analysts are increasingly bullish on China’s growth outlook. Song Seng Wun, Regional Economist at CIMB Research, said China could expand as much as 9 percent this year, much higher than the official target of 7.5 percent.

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