China Raises GDP Views; Inching Closer to Japan

123jump.com Staff
25 Dec, 2009
New York City

Financial markets in Japan and China closed lower when most markets around the world are closed to celebrate Christmas. China revised its 2008 economic growth higher and is set to surpass Japan in 2010. Japan passed record $1 trillion budget.

[R]12:55 PM New York – Financial markets in Japan and China closed lower when most markets around the world are closed to celebrate Christmas. China revised its 2008 economic growth higher and is expected to surpass Japan in 2010. Japan passed record $1 trillion budget.[/R]

Most world financial markets were closed today except in Japan, China and Thailand.

Japan Passes Record Budget

Japan passed its record budget of $1 trillion for the next fiscal year with higher spending on family assistance and education and sharp cuts in construction projects. The government debt at the end of next fiscal year in March 2011 is expected to surge to $8 trillion or 181% of its GDP.

The yen hovered near its recent highs against the dollar and the euro as investors worry that weak global economy and stretched government finances will not revive the economy in Japan. The record annual average in yen is expected to dampen corporate profits in the current fiscal year.

China to Surpass Japan GDP in 2010

China revised higher its economic growth estimate for 2008 to 9.6% from 9%. China revises its economic estimates frequently as it takes deeper measures of economic activities in the service and construction sectors.

The 2008 GDP was revised to 31.405 trillion yuan ($4.6 trillion) from 30.067 trillion yuan said today Peng Zhilong the head of statistics bureau.

The statistics bureau said that the upward revisions were largely driven by higher contribution of the service sector and smaller private companies. The sector share in the GDP was revised in 2008 to 41.8% from 40.1%.

In the current year China has targeted annual growth rate of 8% and the economy is widely expected to overshoot the target. Economic growth in the first quarter was 6.1% and increase to 7.9% in the second and to 8.9% in the third.

Peng also said that China will revise higher its current year quarterly economic growths and annual economic growths since 2005.

At the current pace, Chinese economy is expected to be larger than that of Japan of $4.9 trillion next year.

Russia Lowers Interest Rates

Russia lowered key lending rates for the tenth time this year since April as the country struggles with the largest economic decline in a decade.

Bank Rossii lowered its key refinancing rate by 25 basis points to 8.75% effective Monday and the lowest one-day repo rate to 6% from 6.25%.

The latest rate cuts are not expected to spur lending as banks have essentially stopped lending to small and medium sized businesses and consumers.

Russian economy has struggled in the first half as the commodities prices declined and exports of metals, ores and energy shrink. The economy in the second quarter dropped 10.9% and 8.9% in the third quarter and is expected to shrink at a slower pace in the current quarter.

Russia is targeting 5% economic expansion in the next year and hopes that lower rates will spur lending as global markets recover. Rates in April were 13%.

Most businesses are paying rates between 14.5% and 16% according to local banks.

Russia is battling high inflation as consumer prices surge at a rapid clip in the last three months. The latest data from the Federal Statistics Services showed 9.1% increase in November. Unemployment is at 8.1% and sharp cuts in rates have not lifted consumer spending.

The International Monetary Fund has urged the central bank to focus on curbing inflation and increase productivity in the economy. The IMF prefers to lower inflation target to 5% or below in 2010.

The ruble increased against the dollar to 29.47 and to one euro at 42.59 after the rate cut and the central bank said that the risks of inflation overshooting the target rate between 6.5% and 7.5% are “insignificant.”

World Markets Review

The Nikkei 225 Stock Average in Tokyo closed lower 42.21 or 0.40% to 10,494.71, and CSI 300 index in China lower 14.03 or 0.41% to 3,424.78. Markets in Hong Kong, Australia and Malaysia were closed.

SET index in Thailand closed higher 3.20 or 0.44% to 730.41. Markets in South Korea, Indonesia and India were closed today.

European markets were closed.