Industrial Production News
- Rising output stokes tightening talk
Date: 16-Mar-2007 Sources: (Shenzhen Daily)
THE country's industrial production surged at the start of the year, the government said Thursday, reinforcing expectations that the government will soon tighten policy so the world's fourth-largest economy does not overheat.
Factory output in January and February combined grew 18.5 percent from a year earlier, blowing past market forecasts of a 15.5 percent gain.
The increase, the biggest since June, also outpaced December's 14.7 percent growth rate and the 16.2 percent rise logged in the first two months of 2006.
The output figures chimed with releases this week showing that bank lending and money growth powered ahead in February and that exports jumped 50 percent last month from a year earlier.
'Robust industrial production growth suggests the economy has rebounded sharply from the policy-induced slowdown in the third quarter of 2006. If activity and loan provision growth continues to accelerate, we believe the risks for policy tightening will rise,'economists at Goldman Sachs told clients.
'Combined with stronger-than-expected data released earlier this week, we see heightened policy risk and expect the government to introduce a slew of tightening measures soon, including trade policies to curb export growth; monetary policies to mop up excess liquidity and cool down bank loan growth; and even administrative measures to slow investment and production growth,'Sun Mingchun at Lehman Brothers said.
A newspaper run by the central bank fanned the tightening talk with a front-page editorial.
'In order to avoid a rebound in fixed-asset investment and to reduce potential risks in the financial system, the central bank might need to introduce further tightening measures to mop up liquidity and contain credit expansion,'the Financial News said.
Production of transport equipment rose in the first two months by 26.1 percent from a year earlier, ferrous metals 28.5 percent, chemicals 21.7 percent and textiles 17.8 percent, the National Bureau of Statistics said.
Factories are humming not only because of booming exports, but also because of lofty investment rates as China rushes to industrialize and urbanize.
All eyes are now on Friday's investment data for signs that fast loan growth is fueling a resurgence in capital spending as last year's government curbs on land use lose their bite.
'Strong growth is good but an investment boom would be bad,'said Tim Condon, chief economist at ING Financial. 'Fears of a China investment boom-bust could supplant the U.S. subprime sector as the next cause of an investor flight from risk.'
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