China’s commerce minister said his nation’s economy is heading for a rebound this month following government measures to support growth, adding to signals of confidence among officials that the slowdown is ebbing.
“I personally think that the June situation is turning for the better,” Chen Deming told reporters yesterday in Los Cabos, Mexico, without specifying the signs of improvement. With a “pretty obvious” downward trend the past two months, policy makers took steps to shore up consumption, he said.
The comments build on weekend remarks by President Hu Jintao that China will “maintain steady and robust growth” and by a central bank adviser who predicted the economy will bottom out this quarter. While China has indicated it won’t embrace the scale of the record stimulus unleashed in 2008, stabilizing its expansion rate would avert a greater drag on a global rebound hurt by Europe’s crisis and elevated U.S. unemployment.
“China’s economy has hit the bottom in May and a moderate recovery has already started in June,” said Ken Peng, an economist in Beijing at BNP Paribas SA. With a policy response that includes “accelerated infrastructure spending and relaxed bank lending, there’s no reason for the June economic indicators to worsen,” he said.
China’s annual gross domestic product will grow 7.4 percent in the April-to-June period from a year earlier before picking up to 8.5 percent in the last period of 2012, Peng forecasts. First-quarter growth decelerated for a fifth period to 8.1 percent, the least in almost three years.
The MSCI Asia Pacific Index of stocks fell 0.2 percent at 4:04 p.m. in Tokyo, while the yuan was little changed against the dollar at 6.3563 in Shanghai.
Chen said that his nation’s goal of 10 percent growth in trade this year is “still possible” if the European debt crisis can be contained in the second half. Exports from January through May rose 8.7 percent from a year earlier, while imports were up 6.7 percent. First-half trade gains “may be a bit less than 10 percent,” he said.
Leaders from the Group of 20 are gathering today and tomorrow in Los Cabos for a summit dominated by Europe’s crisis, with the continent’s trading partners urging stronger action to avert a euro-region meltdown. China will contribute $43 billion to the International Monetary Fund’s expanded firewall against turmoil, the official Xinhua News Agency reported.
The world’s most populous country has to “start our own consumption so that domestic markets can help offset some impacts from global trade,” Chen said. Besides the first reduction in interest rates since 2008, China has in recent weeks accelerated approvals for projects including clean energy and lower-polluting steel mills to aid for first-home buyers.
China has allowed mutual funds to invest in private bond placements by smaller companies in a new trial program, according to a notice issued by the market regulator and obtained today by Bloomberg News. The country also permitted the first sales of high-yield bonds this month in a pilot program to expand funding for businesses, according to stock-exchange statements.
The interest-rate cut June 7 followed a similar move by Brazil last month, and by Australia June 5. India’s central bank yesterday unexpectedly held off, keeping borrowing costs unchanged as that nation confronts inflation pressures.
A quarterly central bank survey of 3,000 bankers in China, published today, found that 67.9 percent of respondents deem current monetary policy “appropriate,” up 8.6 percentage points from the previous quarter. About 32 percent said monetary policy will be loosened next quarter, compared with 6.7 percent in the prior survey.
The Reserve Bank of Australia lowered rates after a “finely balanced” discussion on how the domestic economy was holding up as global prospects worsened, according to a record of this month’s meeting that was released today.
In the U.K., a report today may show that consumer prices rose 3 percent in May from a year earlier, holding at the lowest pace of gains in more than two years as oil and food prices fall, according to a survey of economists by Bloomberg News.
Housing starts in the U.S. climbed to a 722,000 annual pace in May, the fastest since October 2008, analysts anticipate a report from the Commerce Department will show.
Economists are paring forecasts for China’s growth, with Credit Suisse Group AG seeing a 7.7 percent expansion this year, the weakest pace since 1999. A slowdown in investment and past curbs on home purchases added to weakness in exports in cooling the economy. The median estimate of 15 analysts surveyed by Bloomberg News June 8-13 was for 8.2 percent expansion in 2012.
Hu said in a written interview with the Mexican newspaper Reforma that China has taken “targeted measures to strengthen and improve macroeconomic regulation, accelerate the shift of the growth model, adjust economic structure and build long-term mechanisms to boost domestic demand.” Xinhua reported the comments on June 17.
Chen Yulu, an academic adviser to the People’s Bank of China, said in a June 16 interview that the second quarter “should be the lowest point” this year. Full-year growth “should be able to hold up above 8 percent,” he said.
Even with steps to strengthen demand, Chinese authorities have signaled the new stimulus won’t match that of measures from the 2008 credit crisis. Total stimulus this year may be less than one-third the size of the 5.4 trillion yuan fiscal and monetary firepower of 2009, according to Peng Wensheng, chief economist in Beijing at China International Capital Corp.
A rebound this month may not be assured. Ma Jun, chief China economist at Deutsche Bank AG in Hong Kong, said the rate cut will take some time to be felt throughout the economy.
In a separate briefing in Mexico yesterday, He Jianxiong, director general of the People’s Bank of China international department, said the institution will give greater consideration to the environment outside China in deciding monetary policy.
Chen Deming urged nations to avoid trade protectionism, as disputes simmer between the U.S. and China. The Asian country doesn’t provide adequate data about subsidies and other government assistance it gives to its domestic industries, the World Trade Organization said in a June 12 report.