【09.12.29 澳大利亚人报】China aims for 10pc growth and won't appreciate yuan

青蛙小王子

http://www.theaustralian.com.au/business/china-aims-for-10pc-growth-and-wont-appreciate-yuan/story-e6frg8zx-1225814239657

CHINA has set the ambitious target to grow its economy by 10 per cent next year, by maintaining government investment and low interest rates, while rejecting growing international demands to stop holding down the currency.
The strategy will reap more dividends for Australia's mining sector, as demand will stay high for raw materials. But it is expected to create headaches for global economic policymakers, as China vows not to be "bullied" into appreciating the yuan "in any form".
Chinese Premier Wen Jiabao said yesterday the national economy had improved and was back on track to reach the growth target in the year ahead.
"Our mood was very heavy. We didn't know how much this disaster (the financial crisis) could hurt the Chinese economy or how long it would last," Mr Wen said in an extensive interview with state-run newsagency Xinhua. "We have stabilised the economy and employment and maintained social stability over the past year, which is a comfort to me."
The Premier said the central authorities had no plans to change the management of the yuan, which had earlier helped the country through the 1998 Asian financial crisis and contributed to the global recovery in that time.
"A stable Chinese currency is good for the international community," Mr Wen said.
Mr Wen reiterated his long-standing mantra that China's growth profile needed to change. The Chinese economy has grown at 8.5 per cent over the past year.
"It is a structural problem for China's economy which is still unbalanced, unco-ordinated and unsustainable," he said, reinforcing broad policy statements made by China's ruling Politburo on November 27 and by its annual Economic Working Conference earlier this month.
Economists see China's policy of artificially depressing the currency as a form of protectionism as it makes the country's export goods cheaper compared with those of other nations, handing it a competitive advantage.
"China will work together with other countries to curb trade protectionism and push forward with the Doha Round trade negotiations," Mr Wen said.
Analysts have given much of the credit for the buoyant Australian economy to strong trade links with China that this year returned to its position of No 1 trading partner and became Australia's largest export market. Bullish forecasts by China for growth in commodities demand next year augur well for the local resources sector.
One of China's top steelmakers, Wuhan Iron & Steel Group (Wugang), said at the weekend it planned to boost production by 24 per cent next year as demand recovered and the economy continued to strengthen.
Wugang expected to produce 37.9 million tonnes of crude steel next year, up from a forecast of 30.5 million tonnes this year, the company said.
The group portrayed 2009 as the toughest year in the company's history. But despite government concerns about industry overcapacity, it will go ahead with its 10 million tonnes steel project in the Guangxi Zhuang autonomous region and expects steel output across China to climb by 10 per cent next year.
"Domestic demand for coking coal will rise moderately next year, while global demand may gain faster, intensifying competition," China Coal Transportation and Distribution Association senior adviser We Chunghao said in a recent interview.
With a massive surge in Chinese demand for coking coal during 2009, and Chinese companies viewing Australian coal producers as acquisition targets, analysts are predicting prices may jump by as much as 38 per cent next year.
"Australia is by far the best-placed advanced economy to benefit from Asia's burgeoning demand for commodities, which on our forecasts shows no sign of abating," said Nomura's Australian chief economist, Stephen Roberts.
Already, more than 70 per cent of Australia's exports are destined for Asia, more than 20 per cent to China alone.
But China's strong growth next year will depend on new investment rather than booming exports, which have underpinned the 17-year success story that stalled late last year.
"Some indicators (for example GDP growth) in China are returning to the pre-crisis level, but some may never make it to these levels again. External demand growth, for example, is unlikely to return to the levels seen in past years," Citi economists Minggao Shen and Ken Peng said.
"China's post-crisis growth will have to be different. Investment will continue to be the key contribution to growth in 2010 and beyond, and GDP growth could accelerate even further in the mood of recovery next year. However, in the medium to longer term, China's growth will have to be constrained by the expansion of domestic consumption."
In a report about China's economy in 2010, Sinolink Securities economist Chen Dong wrote: "Though China saw its economy have a strong recovery in 2009, the imbalance in economic structure is still severe.
"The imbalance requires China to reduce its dependency on export and investment, promote domestic consumption and lower both the government's and people's saving rate."
In the last quarter of 2008, China's GDP growth slid to 6.8 per cent year-on-year from 9 per cent in the previous quarter, as global demand for the country's exports collapsed due to the sudden impact of the global financial crisis, which quickly morphed into worldwide recession.
In response to the global downturn, the Chinese announced a range of measures to prop up the economy, including the 4 trillion yuan investment plan, which was adopted on November 5 last year.
The stimulus package also contained edicts to the major state-owned banks to accelerate lending, a policy that saw new loan volumes hit record levels. Bank lending is expected to pass 10 trillion yuan ($1.65 trillion), double the number originally budgeted.
"It could have been better if our bank lending had been more balanced, better structured and not on such a large scale," Mr Wen said. He said credit expansion was one of the "unexpected difficulties" China had encountered in dealing with the worst crisis and the State Council had noticed the problem in the middle of the year and moved to correct it. "It has been improving in the second half," he said.
However, economists are predicting that lending will continue next year at about 7-8 trillion yuan, raising fears of bubbles in the property, asset and stockmarkets. Mr Wen admitted that surging property prices in major cities were worrying the government.
The biggest challenge facing China is the rebalancing of its economy, the key plank of which is raising consumer consumption. The Chinese are inveterate savers -- a trend that has only increased in recent years despite the country's apparent prosperity.
"The government should provide more social welfare and increase people's dispensable income to promote public and personal consumption," Sinolink's Mr Chen said. "Private enterprises should be allowed into more investment fields, and the government should open more sectors, and give preferential taxation policies to the service industry."
Goldman Sachs economists Helen Qiao and Yu Song said that 2010 and 2011 marked "a critical period for China to rebalance its policies to promote more balanced and sustainable growth".
"We expect continued solid growth in 2010 and 2011, supported by strong fundamentals and the improved timing and scale of macro policy adjustment," they said. "This could present a particularly good opportunity to align China's policy target on improving living standards, reforming social security, healthcare and education systems, as well as improving environment standards."