Chinese 10.7% Growth Fuels Bubble Worries

Mayank Mehta
21 Jan, 2010
New York City

Stocks in Hong Kong and Shanghai dropped sharply after China reported fourth quarter economic expansion of 10.7%. Resource, auto makers, realtors and banks led the decliners. Copper production surged and crude oil production increased in 2009.

[R]8:00 PM Hong Kong, China – Stocks in Hong Kong and Shanghai dropped sharply after China reported fourth quarter economic expansion of 10.7%. Resource, auto makers, realtors and banks led the decliners. Copper production surged and crude oil production increased in 2009.[/R]

Markets were on the defensive after China reported another quarterly economic expansion that fueled worries that Chinese economy may have overheated.

In the fourth quarter economy expanded at 10.7% compared to a year ago and in 2009 grew at 8.7% above its target rate of 8%. China also revised its third quarter expansion to 9.1% from the previous estimate of 8.9% and first quarter at 6.2% from 6.1%.

Fixed investment in urban areas soared 30.5% in 2009 according to the Chinese statistics agency.

Industrial production increased in December at 18.5% and retail sales surged at 17.5% according to a separate report issued by the agency.

Consumer price index in December increased 1.9% and producer price index rose by 1.7%, meeting the forecasts laid out most economists.

Commodities prices in Asia and later in London declined on the worries that China will soon issue tighter monetary rules and force bank to increase their reserve ratios.

Hang Seng index in Hong Kong decreased 423.50 or 1.99% to 20,862.67, and CSI 300 index in China higher 14.14 or 0.42% to 3,408.57.

Statistics bureau also reported the copper production increased 9.6% to 4.25 million tons in 2009, record level as Chinese smelters expand to meet a surge in construction industry demand.

China also increased its production of refined crude and natural gas output in 2009. According to the data compiled by China Mainland Marketing Research Co. for the government, refined crude production increased 7.9% to 374.6 million tons.

China currently processes 7.5 million barrels a day and has a capacity to process 10 million barrels a day.

China has installed capacity to process 510 million tons and production this year is expected to increase to 400 million tons according to China Petrochemical Corp.

In 2009, gasoline or petrol production increased 13% to 71.9 million tons, diesel production increased 6% to 141.3 million tons and natural gas output surged 7.7% to 83 billion cubic meters.

Other Movers

Aluminum Corporation of China Limited fell 3.9% to HK$9.06.

Anhui Conch Cement Company Limited decreased 0.5% to 43.15 yuan on the worries that tighter monetary policy and increase bank reserve requirements may slow the economic expansion in the current year.

Banks declined on the worries that more banks will be asked to slow lending and may be imposed with more restrictions. Bank of China Limited slipped 2.0% to HK$3.87 and China Construction Bank Corporation fell 1.9% to HK$6.10.

China Shenhua Energy Company Limited fell 2.2% to 30.91 yuan after the coal producer said its commercial coal production for 2009 rose 13.2% from a year earlier to 210.3 million tons.

China Southern Airlines Company Limited advanced 2.5% to 6.34 yuan after the carrier announced that it expects a net profit for fiscal 2009, compared to the net loss in fiscal 2008 RMB 4.8 billion. The company cited lower operating and fuel costs for the improved performance.

Country Garden Holdings Company Limited the property developer dropped 3.0% to HK$2.84 and Henderson Land Development Company Limited the developer slipped 4.0% to HK$51.90.

Industrial and Commercial Bank of China Limited slipped 2.8% to HK$5.72.

Jiangxi Copper Company Limited fell 3.2% to HK$17.22.

Shimao Property Holdings Limited dropped 3.5% to HK$12.60 and the real-estate developer expects to record an annual increase of more than 200% in its 2009 net profit. Company reported net profit of RMB 61.05 million in 2008.