China's Booming, but Looks Deceive
Emerging Markets
CHINA'S ECONOMIC GROWTH is looking robust. Last week, the mainland reported that its economy grew 9.4% in the third quarter, beating expectations. September industrial production jumped 16.5% from a year earlier, the fastest growth rate since June.
Many mistakenly expected a slowdown this year. Today, again, some analysts are starting to mistrust the boom, including Chen Xingdong, who until last month could be relied on to supply an optimistic forecast. Chen is the Beijing-based economist for BNP Paribas, and he expects gross-domestic-product growth will slow next year to 8.4% from this year's 9% and 9.5% in 2004.
Chen blames high oil prices, and also thinks export growth is unsustainably high. The trade surplus has ballooned, probably because exporters pushed out goods ahead of any rumored currency revaluation, and importers held off on buying for the same reasons. (China revalued its currency higher earlier this year.) That won't continue, he says.
Then, there are political issues. By all rights, the current cycle ought to peak in 2005 and head lower, before bottoming between 2008 and 2009, says Chen. Yet, that's out of line with the mainland's political agenda, since 2008, 2009 and 2010 are all "politically important" years. The Olympics and the 17th Party Congress will be held in 2008; a new government assumes office in 2009, and the World Expo takes place in Shanghai in 2010. Thus, Chen thinks China will engineer a slowdown in 2006 and a recovery in late 2007, to wow visitors the following year.
What do the data actually show about China's economy? Says Lakshman Achuthan, managing director at the Economic Cycle Research Institute in New York, and steward of the leading index of China industrial production, "Our leading index bottomed in early summer and then recovered. Part of the reason GDP beat the survey is IP is heating up." (Industrial production accounts for about 40% of Chinese GDP, and is reported monthly, not quarterly.)
Looking ahead, however, the leading indicator is easing a bit. "We're now in a small cyclical upturn," Achuthan says. "We may get another quarterly GDP number that beats expectations. But when we look ahead, we see the leading index softening again."
The index forecasts two quarters out, and for now, at least, foresees a "noticeably slower" economy.
A BLONDE STUMBLES into a deserted house and samples three empty beds and three unattended bowls of oatmeal until she finds ones she deems "just right." She burps with satisfaction, then takes a nap, only to be awakened by three perplexed bears, rightful owners of the bowls and the beds. She shrieks. The story of Goldilocks isn't a particularly satisfying one. Without the bears, there would be no story at all.
"I have been worried about the generally bullish views on Japan and longing to find some decent bears," says Jonathan Allum, the Japan strategist at KBC Financial Products in London. Yet, in regard to Japan, where the market is up 15% this year on hopes that deflation is ending and the Japanese economy gaining steam, the bears seem to have vanished. After all, Prime Minister Koizumi's beloved postal reform has now passed. Merrill Lynch, in its monthly survey of global investors, found that 54% are Overweight Japanese stocks, a record matched only in the spring of 2004 and the winter of 1999.
There are a few bears to be found, of course. One is James Montier of Dresdner Kleinwort Benson in London, who recently wrote that Japan's market "looks like a seriously overcrowded consensus trade." Deflation is far from extinct, and land prices are still declining.
Hajime Kitano, the strategist at Mitsubishi UFJ Securities in Tokyo, also has carped to clients that a bullish feature about Japan's structural change in the Economist magazine was a "bit late." Kitano said that while structural change is real, it's being written about "at the worst time...compared with short-term economic cycles."
When we caught up with Kitano last week, he said, "I'm still concerned about the bullish sentiment," especially since Japan's business cycle might reverse. Even though the benchmark Nikkei 225 index is off 4% from its October 4 high, "this correction is not enough," he added. Kitano thinks the market could fall by at least 15%.
There there's David Scott, once a Deutsche Bank strategist, who now runs Chaam Advisors in Thailand and penned his own piece last week, arguing that Japan "trades like a cyclical share," and would "rerate" once investors "scent a whiff of inflation." Scott thinks Japan has room to fall.
"Once every four to five years, foreigners fall in love with Japan, but I don't think Japan's changed that much," he noted. "It's still a cyclical place. When the world is going great, profits look reasonably good. Then [the Japanese] start to expand capacity at the same time the world economy starts to slow."
Domestic investors remain downbeat. The biggest bears of all have been buying the dollar against the yen. Thus, the Nikkei's year-to-date gain in dollar terms is just 2% -- not too far off the dollar-adjusted performance of Australia....or France. The Dow industrials are down about 4.6% for the year.
Says Jerome Touw, who manages Japan funds for ABN-Amro Asset Management in Hong Kong, "A true bull market climbs a wall of worry. But for the next year and a half, we are in a true bull market. The listed sector is financially extremely healthy. This is a solid story."
中国经济高增长势头似将难以为继
中国的经济增长速度看来非常强劲。上周，大陆宣布第三季度经济增幅超过预期，达到9.4%。九月份工业产值较上年同期激增16.5%，是6月份以来增幅最大的一个月。
很多人都错误地认为今年中国经济增长步伐会有所放缓。现在，又有一些分析师开始对这片繁荣景象表示怀疑了。法国巴黎银行(BNP Paribas)驻北京经济学家陈兴动就是其中一位。他预计2006年中国经济增幅将从2004年的9.5%和今年的9%降至8.4%。陈兴动将经济增速放缓的原因归咎于高油价，认为中国出口增速之高将难以为继。中国贸易顺差之所以迅速扩大可能是因为出口商纷纷抢在传言人民币可能升值之前将商品迅速出手，而进口商则出于同样原因按兵不动。（中国年初曾上调人民币汇率。）陈兴动认为，这种现象不会持续下去。
此外，还需要考虑政治因素。陈兴动说，从任何角度考虑，眼下中国的经济周期都应在2005年形成高峰，然后逐步回落，在2008-2009年之间触底。不过，这种走势有违大陆的政治需要，因为2008年、2009年和2010年都是“具有重大政治意义”年份。2008年奥运会将在中国召开，同年中国共产党第十七届全国代表大会也将召开；2009年是政府换届；2010年上海将举办世界博览会。为此，陈兴动认为，中国会设法调控经济增长速度，让增长步伐在2006年放慢、在2007年下半年开始复苏，并在2008年以一片繁荣景象迎接来自世界各地的人们。
那么，经济数据体现出的中国经济前景又是如何？纽约经济周期研究会(Economic Cycle Research Institute)发布了中国工业产值领先指数，该学会董事总经理兼该指数主管阿楚坦(Lakshman Achuthan)说，“这只指数今年夏天触底，现在已经反弹。中国国内生产总值(GDP)超过预期的部分原因是工业产值继续走高。”（中国的工业产值占GDP的40%左右，工业产值数据每月公布一次。）
不过，从领先指标看，接下来的时间中国经济会略微减弱。“指数现在正处在一个较小的周期性高潮，”阿楚坦说。“下个季度的GDP仍有望超过预期，但再往后看，领先指标显示再次走软。”
该指数预计的是未来两个季度的经济走势，至于目前，至少指标预示中国经济将“显著放缓”。
