China Watch Blog has reported that China's economy grew even faster in 2009 than previously reported, adding to concern that the flood of stimulus spending and loans that drove its rebound has left a dangerous glut of unneeded factories and other assets.
The government raised its estimate of 2009 growth yesterday from 8.7 per cent - already the fastest among major economies - to 9.1 per cent, boosting China's economic output to the equivalent of US$4.98 trillion.
That suggested Japan clung to its title as the second-largest economy with just under US$5.1 trillion in output.
Beijing propelled its recovery from the global slump with a four trillion yuan stimulus and record 2009 bank lending of 9.6 trillion yuan. But the country's Communist leaders now worry that that drove overspending on factories and other facilities, which could lead to economic problems if producers are forced to slash prices in glutted markets or cannot repay bank loans.
'There definitely are risks of overcapacity from all this investment,' said Citigroup economist Ken Peng.
He said Beijing is likely to have to step in and repay at least some of the debts of overextended state companies or local governments.
Makers of steel and textiles are likely to be hit hardest because they have the biggest oversupply and foreign demand for their goods is weak, said Lu Zhengwei, senior economist for Industrial Bank in Shanghai.
Steel producers, which expanded output as demand from stimulus-financed construction projects surged, have 16 million tonnes of unsold stock, state television said yesterday. It said mills are selling steel at prices below cost.
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