Go you good thing
by Peter Switzer
Those looking to doubt our recovery have been dealt some news they won’t like to hear with the Chinese economy reported to have grown by 8.9 per cent in the September quarter.
This was an economy that the so-called experts said would be lucky to grow at six per cent!
Late last year when I kept telling anyone who would listen that we were a chance of avoiding a technical recession and that global governments’ fiscal as well as central banks’ interest rate policies would work to prevent the global recession to turn into a depression, China was crucial to the story ending up being right.
I used to tell my business audiences that before they go to bed each night they should get on their knees and pray for China. The emerging economic super power was not only critically important to the global economy, it’s also a big export customer for our pin-up mining companies such as BHP Billiton and Rio Tinto.
Its importance reduced our dependence on other economies and particularly the USA, and this helped insulate us from the global shock that became the GFC.
In fact, China took a leadership role by being just about the first big economic power to come out with a massive stimulus package.
And the result has been these phenomenal growth figures in what still is a struggling, albeit getting better, world economy.
China’s annual growth of industrial production is at the highest level in 14 months, while retail sales growth is now at the best levels in 2009.
CommSec says China’s urban fixed asset investment, that is things like spending on roads and power plants, grew at a 33.3 per cent annual pace in the first nine months of the year, just short of the fastest growth pace in five years.
And get this — China's passenger car sales boomed 83.6 per cent in September from a year earlier. Nothing is small in this country!
And it’s happening with no inflation threat.
Remember we dodged the GFC recession bullet because of our big interest rate cut, the government’s stimulus package and the rebound of the Chinese economy.
I have always thought it a delightful irony that the world’s greatest Communist power rode to the rescue of modern capitalism.
By the way, Chinese officials have suggested we “ain't seen nothin’ yet” with more growth expected.
All of this augurs well for jobs and business opportunities in Australia and it’s good to see those prayers have brought a power of good.
The Chinese growth story will please the Reserve Bank and vindicate their intention to remove the so-called “emergency level interest rates”. That is, it keeps the pressure on for further interest rate rises.
With economics, good news can bring bad news and that’s why the cynics have tagged it as the dismal science!
P.S. One final point should be made. Looking at the US money websites, not a lot was made of the big Chinese growth story but if their figures came in at 6.9 per cent instead of 8.9 per cent, Wall Street would not have seen the Dow Jones storm into positive territory this morning.
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Published on: Friday, October 23, 2009blog comments powered by Disqus