Business Monitor International Ltd
Q408 GDP Data Con Ou Fas
As anticipated, Q408 GDP data conrmed that China is far from immune from the unfolding
global recession, with real growth dropping to 6.8% y-o-y. This marked the weakest out-turn in seven years and dragged full-year growth to 9.0%, a sharp decline from the 13.0%
recorded in 2007 and the rst time since 2002 that the world’s third largest economy hadfailed to register double-digit headline growth. With things expected to get worse before
they get better, we are anticipating further grim news from China in H109, and reiterateour below-consensus 5.6% growth forecast for the year.
Indeed, trade data for December revealed that both imports and exports suffered a second
consecutive month of contraction, with exports falling by 2.8% y-o-y, accelerating fromthe 2.2% decline recorded in November, while imports plummeted by 21.3% y-o-y havingdropped by 17.9% in the previous month. Notably, Exports to the US (which purchased
17.7% of China’s total exports in 2008) fell by 4.1% y-o-y in December to compound
November’s 6.1% decline, while shipments to the EU (which, with a 20.5% share, was
China’s single biggest export destination in 2008) fell 3.5% y-o-y in December after re
maining at in the previous month.We have recently revised down our 2009 growth forecasts for both the US and the EU – from
-2.0% and -1.6% to -2.3% and -2.5%, respectively – implying that export growth is likely to
remain in negative territory (or at least remain very weak) over the near term. Meanwhile,
imports are likely to follow suit as commodity prices continue to trend lower, demand forinputs for manufacturing exports decline and domestic demand remains sluggish.
Dostic Dand Unlikly To Co To Th rscu
To be sure, although not as bleak as recent trade data, leading indicators of domesticdemand are painting an increasingly bearish picture. Retail sales grew by 19.0% y-o-y in
December, and although this is still a strong number, it nevertheless marked a third con
secutive month of slower growth having reached 23.2% in September 2008. Meanwhile,urban xed asset investment (FAI) growth slowed to 26.1% in 2008. Once again, whilethis is still an impressive outturn, December nonetheless represented a third straight monthof slower growth after peaking at 27.6% in the January-September period. Moreover, realestate investment continued its rapid slide in December, with growth decelerating for a
sixth month in a row to 20.9% y-o-y, having hit a record high of 33.5% in June.
Property price growth dipped into negative territory in December, and leading property
market indicators suggest that the slowdown has further to run. The quantity of land pur-chased – an indicator for future property development – fell by 5.6% y-o-y in November,according to the most recent data available from the National Statistics Bureau, compounding
the previous month’s 2.6% decline, while growth of oorspace of commercial buildings
sold spent a ninth straight month in negative territory after it contracted by 16.5% y-o-y in
November. Perhaps most worryingly though is the fact that despite growth of oorspace of
commercial buildings under construction continues to slow (it registered growth of 18.7%y-o-y in November, down from a peak of 32.1% in February 2008), it is still expanding.
Economic growth dipped to a seven-year low
of 6.8% in Q408, dragging full-year growth for
2008 to 9.0% – a sharp decline from the 13.0%
recorded in 2007 and the rst time since 2002
that the world’s third-largest economy had
failed to register double-digit headline growth.However, the bad news does not stop there.
Recent macroeconomic data has shown that
economic activity continues to cool, and we do
not foresee any turnaround in fortunes for theChinese economy until the second half of 2009
at the very least, highlighting that is more likely to be 2010 before a recovery gets under way.With this in mind, we expect real GDP growth
to slow to 5.6% in 2009.
Worst Outturn In Seven Years
Real GDP (chg % y-o-y)
Souce: National Bureau of Statistics
Q 1 0 1 Q 2 0 1 Q 3 0 1 Q 4 0 1 Q 1 0 2 Q 2 0 2 Q 3 0 2 Q 4 0 2 Q 1 0 3 Q 2 0 3 Q 3 0 3 Q 4 0 3 Q 1 0 4 Q 2 0 4 Q 3 0 4 Q 4 0 4 Q 1 0 5 Q 2 0 5 Q 3 0 5 Q 4 0 5 Q 1 0 6 Q 2 0 6 Q 3 0 6 Q 4 0 6 Q 1 0 7 Q 2 0 7 Q 3 0 7 Q 4 0 7 Q 1 0 8 Q 2 0 8 Q 3 0 8 Q 4 0 8