Country Report China April 2009

Outlook for 2009-10

• The government's main priority is to support the economy, amid concerns that rising unemployment could increase social unrest. But even if unrest grows, it is unlikely to lead to a nationwide anti-government movement.
• Accountability will improve within the ruling Chinese Communist Party, but wider reforms to increase democracy will not occur. The government's campaign against official corruption will intensify.
• The Economist Intelligence Unit expects real GDP growth to slow sharply owing to the massive global economic downturn. In 2009 real GDP will grow by just 6%. Growth will recover in 2010, but only to 7%.
• The economy will be supported by a rapid expansion in government infrastructure spending and policies to revive housing investment. However, this will lead to a substantial rise in the budget deficit.
• Amid slowing demand and falling commodity and food prices, consumer prices are expected to decline by an average of 0.8% in 2009.
• The outlook for exports is poor, but falling commodity prices will also depress import values. As a result, the trade surplus will remain huge. The current-account surplus will fall to 6.2% of GDP in 2009 and 4.6% in 2010.

Monthly review

• Security was stepped up across Tibet in advance of the 50th anniversary on March 10th of a failed Tibetan uprising against rule by China, owing to worries about rising instability in the region.
• The annual session of the National People's Congress (NPC) took place in March, amid continuing concern over the economic downturn. The premier, Wen Jiabao, reaffirmed the country's 8% real GDP growth target for 2009 .
• No new major economic stimulus packages were announced at the NPC, despite the rapidly worsening global slowdown. The Chinese leadership has sought to reassure the country that the economic downturn is under control.
• Mr Wen has announced big spending increases on healthcare and education. As the government attempts to support economic growth through higher expenditure, it is targeting a 3% fiscal deficit for this year.
• The official Purchasing Managers' Index rose to 49 in February. Although still below the neutral level of 50, the index has now risen for three consecutive months, suggesting that China's manufacturing sector has now hit bottom.
• China's export sector is being hit hard by the global recession. Merchandise exports contracted by 25.6% year on year in February. Imports fell by 21.4% in the same month.

Source: Country Report

This report covers the following industry codes:
SIC Code: 39
NAICS Code: 31