TAKE NOTE !!!
REF : Bloomberg Beijing
"THE GOOD news is that China’s government will engineer a soft landing. However, the bad news is that even a soft landing is painful for industries that have become dependent on the fastest-growing major economy as their main profit engine.
Analysts at Deutsche Bank, Nomura Holdings and Daiwa Capital Markets raised forecasts this month for China’s 2012 expansion to as high as 8.6 percent, partly on anticipation of looser monetary policy. The projections, still below last year’s 9.2 percent rate, offer little comfort for Australian mining company BHP Billiton, which sees slower steel production in China, or German vehicle manufacturer Daimler, whose Mercedes dealers in the nation are giving record discounts.
“China’s still going to be growing reasonably strongly,” said Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics who wrote the 2012 book Sustaining China’s Economic Growth after the Global Financial Crisis. Even so, “the super commodity cycle that was driven by China is moderating, and exporters that have ridden the property boom over the last four or five years face a much tougher time”.
Beijing’s curbs on property sales and his plan to tilt the economy toward consumption and away from a dependence on capital spending have reduced production of steel and cement and helped push iron ore prices down more than 20 percent from last year’s high. Nevertheless, said Tim Condon, the head of Asia research at ING Financial Markets, policymakers were ready to take any action necessary to avert a steep deceleration.
“The idea that commodities are just a one-way bet as an asset class is over,” Condon said. “My baseline view is that China will still do whatever it takes to keep growth going. If it slows too much, they will stimulate.”
Copper fell to a two-week low in New York last week after a preliminary purchasing managers’ index for China from HSBC Holdings and Markit Economics dropped to 48.1 from 49.6 in February. Readings below 50 signal contraction. Nickel and lead also erased gains for the year.
BHP Billiton and Glencore International, the Swiss-based commodities and raw materials supplier, have been roiled by the slowest expansion rate in China since the global recession ended in 2009, with shares of both down more than 20 percent from a year ago.
Concerns about China and its property market would probably weaken Australia’s and Brazil’s currencies, said Stephen Jen, the managing partner at SLJ Macro Partners in London. The Australian dollar, which traded at A$0.9554 on Friday against the US dollar, might test parity within the next few weeks, while Brazil’s real might drop as low as 2.50 reais a dollar, a level not seen since 2008, he predicted. It traded at 1.8102 on Friday.
While the Chinese currency was fixed at a record high of 6.2858 yuan a dollar yesterday, the currency has been little changed this year amid slowing export growth, after a gain of 4.7 percent last year. Pressure for appreciation had declined as China’s current account and trade surpluses had fallen over the past four years, said Louis Kuijs, an economist at the Fung Global Institute in Hong Kong.
China’s government has been trying to reverse a surge in home prices, boost consumption and move away from exports and capital spending without causing a sharp reduction in growth.
The government pared this year’s expansion target to 7.5 percent from an 8 percent goal in place since 2005, Premier Wen Jiabao said at the legislature’s annual conference this month. The Shanghai Composite index fell 2.7 percent in three days on the news.
US and European stocks fell last week on concerns about Chinese growth after the country raised fuel prices by the most in two years and BHP Billiton said the country’s steel output growth had flattened.
Debate over China’s economic direction may take centre stage next week at the Boao Forum for Asia, a three-day conference for business and political leaders modelled on the World Economic Forum in Switzerland. "
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Steven
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