An emerging recovery in China is good news for the rest of Asia but the nation does not yet have sufficient clout to boost the global economy as a whole, analysts said.
Data published last week have raised hopes that China could be the first major economy to disentangle itself from the worldwide crisis, providing new growth momentum for several of its trading partners.
“It’s one of the surprises in the past two months,” said Glenn Maguire, a Hong Kong-based economist for Societe Generale. “Those economies that are either capital goods exporters or commodity exporters to China are starting to show encouraging trends in exports.”
A slew of economic figures unveiled on Thursday draw a complex picture of an economy that, while experiencing a dramatic slowdown, is showing signs of being just about to turn a corner.
While overall economic growth in the first quarter was at 6.1 percent — a near two-decade low, some analysts said — investments in fixed assets in the cities were up by over 30 percent last month.
This reflected massive public spending, which the government launched in November soon after the global crisis broke out and which is now also benefiting major exporters to the Chinese market, analysts said.
“China’s role and influence as a growth engine in the region is growing fast, while the US influence is certainly decreasing,” said Lee Moon-hyung, an economist at the Korea Institute for Industrial Economics and Trade.
The nations in the region standing to reap the largest potential gains from a Chinese recovery included Australia, Vietnam and South Korea, Morgan Stanley concluded in a recent report.
Evidence of a positive spill-over effect remains tenuous. South Korea’s exports to China actually declined 22.2 percent year-on-year last month, but Lee argued there were some positive signs.
“Manufacturers of LCD [liquid-crystal-display] panels, auto parts and components as well as petrochemical products are benefiting from China’s 4 trillion yuan [US$585 billion] stimulus package and other policies aimed at boosting domestic demand,” he said.
In a startling example of similar dynamics, Chinese imports of US semiconductors more than doubled in the first two months of this year from the same period a year ago, Chinese customs statistics showed.
But it is unlikely that a Chinese recovery will have a broader impact on the economies in Europe and North America, economists said.
“It’s not going to support consumer goods exporters,” Maguire said. “Just because rural incomes have risen by eight percent, your average Chinese farmer is not going to rush out and buy a new BMW.”
The global crisis may have come as a shock and seemingly turned the world upside down, but basic trade patterns will remain the same for the foreseeable future, some argued.
“We can’t expect the Chinese recovery to be an engine for the Japanese economy,” said Hiroshi Watanabe, an economist at the Daiwa Institute of Research in Tokyo.