Back to double digit growth

21 Jan

There’s been a lot of buzz in the media this morning about China’s announcement that GDP grew 10.7% year-on-year in the 4th quarter of 2009.  2009 GDP expanded 8.7% as a whole, which was higher than market forecasts of 8.4%-8.5% (though I note than the figures published for the first half of the year were slightly upgraded).

I would imagine 2010 is going to be strong, and might actually reach 10%, helped by a surge in exports, which could increase by as much as 35% in the second quarter of this year.

Infaltion in December jupmed 1.9% (against market expectations of 1.4%).  This was primarily due to food prices.  I can see the CPI increasing above the 2.25% deposite benchmark rate some time in the first quarter of 2010, which I would expect to result in an interest rate hike sooner rather than later.

Governmment sponsered spending on rail and highway projects slowed towards the end of 2009.  In conjunction with the macro tightening policies enacted last week (raising banks reserve ratio requirements) this is negative news for the raw material and construction segments.

People are asking what this means for the world economy.  Essentially growth can only be good.  On the back of this good news I would expect wall street to rally today, and perhaps for the dollar to continue strengthening (after its little fall last week) – though that could be affected by payroll data due out today.

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