Signs of Stabilization in China?

Is the economy in China stabilizing?

• January’s PMI shows that the Chinese economy is bottoming out and the trend of a gradual recovery is taking shape. In 2008 there were large fluctuations in the prices of domestic and foreign raw materials, resulting in a severe inventory adjustment and a sharp decline in industrial production. Since November 2008, the inventory adjustment has been largely completed, and the domestic prices of some raw materials, for instance iron and steel, have recovered. –- Zhang Liqun, China Federation of Logistics & Purchasing
  
• The January reading suggests 1) sequential manufacturing growth momentum has been improving from its trough in November; 2) but it is still contracting at a sub-50-threshold level. To put it plainly, things are still getting worse though the pace of deterioration is not quite as rapid as it was in November and December. … However, year-on-year activity growth is likely to remain weak at least in 1Q2009 due to a high base and the time lag for the effects of the stimulus measures to fully surface. -– Yu Song & Helen Qiao, Goldman Sachs
  
• The accelerated rise of manufacturing PMI undoubtedly points to a recovery in China. The rebound of PMI in December and January suggests that the Chinese economy is resilient (due partially to the economic-stimulus plan) and the destocking process is near its end. Today’s PMI reading supports our call of a V-shape recovery and an 8.0% GDP growth forecast for 2009… The first quarter will still be tough for China, as the decline of exports will offset some of the rise in domestic demand; but we expect the economy on the whole to see a salient rebound in as early as 2Q09. – Ting Lu, Merrill Lynch

Economists React: Signs of Stabilization in China?

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