China Economic Scan - Your daily update on the Chinese economy.
In this edition: China CPI falls 1.4% in May, Fidelity's Ma says China's economic growth may beat predictions, China's property sales surge, Baosteel hikes July steel prices, Chinese stocks closed up on Wednesday.
Top 5 headlines
China’s Consumer Prices Decline 1.4%, Aiding Recovery
- Prices dropped 1.4% in May from a year earlier, after falling 1.5% in April, the National Bureau of Statistics (NBS) said.
- The median estimate in a Bloomberg News survey of 16 economists was for a 1.3% decline. Producer prices fell 7.2%, the most on record.
- “China’s economy is already rebounding and as soon as it regains momentum, prices will return to positive territory,” said Sherman Chan, an economist with Moody’s Economy.com in Sydney.
Fidelity’s Ma Says China’s Economic Growth May Beat Predictions
- China’s economic outlook is the “brightest” in Asia and growth may exceed investor expectations, Fidelity International fund manager Stephen Ma said.
- The nation’s economy will expand 7.5% this year, according to economists surveyed by Bloomberg News last month, up from a 7.1% forecast in February.
- “China has done all the right things to support the domestic economy,” Ma said. “I believe China’s GDP growth will continue to surprise people on the upside.” Fidelity International is the London-based affiliate of Fidelity Investments, the world’s largest mutual- fund company.
China’s Property Sales Surge, Add to Recovery Signs
- Sales rose 45.3% to 1 trillion yuan ($146 billion) in the first five months of 2009 from a year earlier and real- estate investment growth quickened to 6.8%, the National Bureau of Statistics said.
- “As developers run down inventory rapidly, they will soon start to buy land and increase spending again,” said Frank Gong, chief China economist and strategist at JPMorgan Chase & Co. in Hong Kong. “Property investment, which accounts for 10% of China’s GDP and is a trigger for growth in related sectors, will become a strong driving force in China’s recovery.”
- The China Se Shang Property Index fell -1.6%, paring this year’s gain to +116%.
Baosteel hikes July steel prices as pressure mounts
- China's top steelmaker, Baosteel, has raised July prices for major steel product prices by more than 10%, industry sources said, as it faces the threat of higher-than-expected iron ore costs.
- Baosteel, or Baoshan Iron and Steel, is deep in talks with Australian miners Rio Tinto and BHP Billiton over iron ore prices, which it wants reset to 2007 levels, meaning a price cut of at least 40%.
- Rio Tinto has already agreed a 33% cut with other Asian mills, forcing Baosteel to choose between a fixed price, albeit more than it wanted to pay, or the uncertain spot market.
Chinese shares up 1% as pace of price declines slows
- Hong Kong lead Chinese stocks, up +4.03% at 18,786, followed by Shanghai up +1.02% to 2,816, and Shenzhen and Taiwan both up +0.75% to 10,281 and 6,462 respectively.
- China State Shipbuilding rose +1.22% to 65.52 yuan, while Guangzhou Shipyard International gained +1.04% to 22.41 yuan.
- Lianyungang Port shares rose by the daily limit of +10% to 7.87 yuan and Shenzhen Expressway Company gained +9.97% to 6.40 yuan.
Financial Indicators:
| Metric | Value | Point change | % change |
| Hang Seng Index | 18,786 | 727.17 | 4.03% |
| Shanghai Composite | 2,816 | 28.36 | 1.02% |
| Shenzhen Component | 10,821 | 80.65 | 0.75% |
| TAIEX | 6,462 | 47.88 | 0.75% |
| CNY/USD | 6.8330 | -0.0024 | -0.04% |
Source: China Economic Scan
