UpdateChina economy slows down further; Q2 GDP growth at 7.5%

15 July 2013 07:18  [Source: ICIS news]

Slowing China worries Asia(adds details on crude, petrochemical prices, comments)

SINGAPORE (ICIS)--China’s economic expansion decelerated further in the second quarter, logging in an annual growth of 7.5%  - the lowest in four years, official data showed on Monday.

In the previous quarter, the economy posted an annual growth of 7.7%, bringing the average expansion in the first six months of 2013 to 7.6%, according to data from the National Bureau of Statistic (NBS).

Fixed assets investments in January to June 2013 increased by 20.1% year on year, down by 0.3 percentage points from the same period last year, the data showed.

For the month of June, China’s industries recorded an 8.9% year-on-year growth, representing a 0.3 percentage-point decline from May, according to the data.

The Chinese government intends to keep implementing a proactive fiscal policy and prudent monetary policy to ensure economic stability, NBS said.

China is targeting a full-year GDP growth target of 7.5%, lower than last year’s 7.8% expansion, which is a 13-year low.

The second-quarter growth, however, was in line with expectations, according to Singapore-based DBS Bank Research in a note to clients.

“We reckon anything above 7.0% is deemed acceptable to the government, as China needs only 7.0% growth on average to double GDP per capita by 2020. No stimulus is expected unless growth dips below that,” it said.

China is not expected to tighten monetary  policy is unlikely as its consumer price index (CPI) has stayed consistently low at 2.4% for both the first and second quarters, DBS Bank Research said.

The country is Asia’s biggest petrochemical importer that its economic weakness is expected to have regional repercussions.

“What happens in China will affect the rest of Asia, including India,” said a Mumbai-based polyolefins trader.

“When Chinese market is weak, everyone will stop buying PE [polyethylene] and PP [polypropylene]. Everyone will be very bearish, and prices will fall,” the trader said.

Concerns about oil demand weakening from the world’s second biggest economy and its top energy consumer were supporting crude oil prices on Monday.

At midday, US crude were trading at $105.97/bbl, with Brent crude at $108.90/bbl. Naphtha prices were $8-9/tonne higher at $919.50-922.50/tonne.

In the toluene market, players have taken to the sidelines following the release of China’s GDP growth slowing down in the second quarter.

Ethylene prices remained at $1,260-1,300/tonne CFR (cost and freight) NE (northeast) Asia, while propylene prices were unchanged at $1,390-1,410/tonne CFR NE Asia.

Additional reporting by Viola Pan and Muhamad Fadhil

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Pearl Bantillo
+65 6780 4359

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