China Retains 8% Growth Target for 2009 Despite Massive Headwinds

By Mike Caggeso
Associate Editor
Money Morning

Citing a healthy financial system and "positive signs" in the its economy, China said its economy is on track to reach the government's 8% growth target for 2009, despite every imaginable headwind picking up speed in the first quarter.

China's exports were down 17.5% in January. That same month, imports fell 43.1% from a year earlier. And China's own figures say its gross domestic product (GDP) grew 6.8% in the fourth quarter of 2008, a seven-year low. In 2007, China's economy grew 13%. 

"I would eat my hat if the Chinese economy was doing anything other than contracting right now," wrote Societe Generale investment strategist Albert Edwards.

Still, China has "the conditions" and "the confidence" to meet its growth goal, Liu Tienan, vice chairman of the National Development and Reform Commission, said at a briefing in Beijing today, Bloomberg reported. 

Liu took it a step further, saying China's economic fundamentals were unchanged.

"Despite the downward pressure on the Chinese economy since the fourth quarter of last year, we have nonetheless seen some signs of recovery compared with previous months," said Liu, who passed on a question about whether the economy has slowed further since the final quarter of 2008, the Associated Press reported.

Many who believe China will hit its target bank their analysis not only on China's $585 billion (4 trillion yuan) infrastructure-investing stimulus plan, but also the belief that China will add more to that already staggering dollar amount.

Earlier this week, Mingchun Sun, chief China economist for Nomura International PLC, said the Chinese government could formally announce the bigger spending plan in March or April.

And that figure could reach as high as 8 trillion yuan within the next three years, as state and local government add previously held growth projects to the infrastructure bill's to-do list.

"Looked at from the perspective of demand and financing capacity, I don't think it will be a big problem to get to 7 trillion-8 trillion yuan," Sun said in estimating the size of the eventual stimulus, Reuters reported. "It could be even higher."

News and Related Story Links: