China economy 'bottoms out', 8% Q2 GDP growth expected

24 June 2009 10:29  [Source: ICIS news]

SHANGHAI (ICIS news)--China’s economy has bottomed out, with second-quarter gross domestic product (GDP) growth expected to be around 8%, economists said on Wednesday.

Figures for the fourth quarter of 2008 and the first quarter of this year showed China had reached the bottom of the economic downturn, based on year-on-year GDP changes, said Guo Tongxin from the Department of Comprehensive Statistics at China’s National Bureau of Statistics (NBS) in an article released on Tuesday.

China’s GDP in the second quarter of this year was expected to be close to 8%, based on current GDP growth and the main economic indices in April and May, Guo said in the article.

GDP growth was 9% in the third quarter of 2008, then slipped to 6.8% in the fourth quarter and further down to 6.1% in the first quarter of 2009 on a year-on-year basis, the article said.

"The article from the NBS has set a tone on the data which will release next month, and the GDP in the second quarter will achieve around 8%," Bian Xubao, an economist from Shandong-based brokerage firm Qilu Securities, said.

Industrial output had rebounded since March and grew at an eight-month high of 8.9% in May. Figures on industrial output showed the bottom of the cycle was reached from November 2008 to February 2009, Guo said in the article.

"The industrial output growth in June will be above 9% based on current economic trend," Bian told ICIS news.

Furthermore, national daily steel output increased from last December to reach 1,848 tonnes in May this year. Daily power generation began growing from March this year with figures at more than 9bn kWh in March, April and May and almost 10bn kWh in the first 10 days of June, according to Guo’s article.

"Our country’s economy has bottomed out and the most difficult times have passed. The economy in the next stage can be expected to be stable and improve gradually," Guo said.

However, demand, especially from overseas, was still weak, Guo said.

China’s exports, a major contributor to GDP growth, had a negative 2.8% contribution to GDP growth in the first quarter of this year amid the financial crisis, Guo said.

"It would be very good if China’s exports can increase year on year by the end of this year," Yi Lei, an economist from Beijing-based Shanxi Securities, said.

China’s exports fell 26% in May. This was the seventh consecutive monthly decline.

Since late last year, the government had begun reducing export taxes on a range of commodities, especially in the labour-intensive sectors. It had also hiked tax rebates for exports seven times since August 2008.

In addition, China’s economy continued to face production overcapacity in some industries and possible inflation, Guo said in the article.

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By: Judith Wang
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