Tuesday, October 15, 2013
China Economy To Be Driven By Domestic Demand
TOKYO (NQN)--The uncertain outlook for the Chinese economy continues as the country's Customs General Administration on Saturday released trade data for September. It showed that exports fell on the year for the first time in three months.
Meanwhile, the National Bureau of Statistics of China said Monday that the country's consumer price index for September rose 3.1% on the year, surpassing the average market projection of a 2.9% increase. This indicates that there is a gap in strength between external and domestic demand.
Chiyuki Shiraiwa, an economist at SMBC Nikko Securities Inc., said there is little need to worry about September's fall in exports because China's trade data is often unreliable on a single-month basis. In June, exports dropped 3.1%, but Shiraiwa believes that exports are on a general recovery.
Shiraiwa emphasized that imports should receive more attention than exports in the September data. Imports rose 7.4% last month and growth was stronger than the average market estimate, showing China's solid domestic demand, Shiraiwa said. In addition to a growth in natural resource imports, corporate inventory clearance ran its course. Because of this, imports increased, Shiraiwa said.
A near-term increase in orders received by China's biggest construction firm in September shows that infrastructure construction is probably rising in China, Shiraiwa said, and is a sign that Beijing is boosting infrastructure investment to raise domestic demand.
Ichiro Yamada at Fukoku Mutual Life Insurance Co. said the September decline in exports has little impact on the Chinese economy because the general medium to long-term trend will be a decline in exports. Some overseas companies are relocating factories from China to Southeast Asia, and the authorities in China are shifting their emphasis from external to domestic demand. Consequently, Yamada said, more market players are factoring in a gradual decline in exports.
With the purchasing managers' index remaining steady over the near term, China's trade deficit is likely to have limited negative impact on Chinese and Japanese stocks, Yamada said.
Yamada warned that just because September's CPI rose more than expected, this does not necessarily mean that domestic demand is strong. The CPI went up not because of a rise in commodity prices but because of rising property prices, he said. He added that while the Chinese economy is in a transition phase, shifting from being export-driven to domestic demand-linked, there is still no guarantee that it will be a smooth transition.