Asia Sentinel, 28 Apr 2009
Although both China's president, Hu Jintao, and its prime minister, Wen Jiabao, have issued confident statements in recent days saying the country is largely on track to resume growth of as much as 8 percent for 2009, there are ample reasons to warn that increasing calls to investors to buy into the China story are premature.
Goldman Sachs is just one of the international investment banks leading the China charge, upgrading its forecast on April 22 to say the economy would expand by 8.3 percent in 2009, higher than the government's forecast of 8 percent. CLSA Asia Pacific Markets, usually the voice of caution, also upgraded its estimate from 5.5 percent annual growth to 7 percent. Morgan Stanley upgraded as well at about the same time, from 5.5 percent to 7 percent for the year,
But the world should have received a wakeup call on April 23 – just a day after Goldman's rosy forecast – when the State Energy Regulatory Commission released statistics showing that power output for the first three weeks of April fell 4 percent year on year after a drop of 1 to 2 percent in March. Industrial production accounts for 70 percent of energy usage. China is reporting first-quarter industrial output growth figures of 8.3 percent. With energy usage so closely tied to industrial production it is very difficult to figure out how production could rise that fast while energy use is falling.
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