Key figures raise growth hopes

Improved prospects for Q4 as steel, electricity production increases

The rally of key industrial indicators in September and early October suggests that China's economy is stabilizing and might post higher growth in the fourth quarter, a senior industrial official said on Thursday.

An alloy steel mill in Dalian, Liaoning province. Key industrial indicators in September and early October have suggested that China's economy is stabilizing and might post increased growth in the fourth quarter. [Photo/China Daily]

"Now is a critical point for the country's industrial economy. Positive factors are accumulating," said Zhu Hongren, chief engineer of the Ministry of Industry and Information Technology, at a news conference organized by the State Council Information Office.

"The stabilizing trend will become consolidated as government (stimulus) policies take effect days," Zhu said.

"The growth of industrial output in the fourth quarter may be higher than that in the third quarter, which would lay a solid foundation for the achievement of the 7.5 percent annual gross domestic product growth target," he added.

Industrial output generally accounts for 40 to 42 percent of China's GDP.

Industrial output growth further dipped to 9.1 percent year-on-year in the third quarter after it dropped to 9.5 percent in the second quarter from 11.6 percent in the first quarter, according to the National Bureau of Statistics.

But key industrial indicators in September rebounded, with year-on-year industrial output rising 9.2 percent, compared with 8.9 percent growth in August.

October saw the positive trend continue. The HSBC preliminary manufacturing purchasing managers' index climbed to 49.1 in October, the highest level in three months, from a final reading of 47.9 in September. Average electricity output during the middle of October saw 4.4 percent year-on-year growth.

"This suggests that the Chinese economy is beginning to stabilize," said Matthew Circosta, an economist with Moody's Analytics.

"Besides, the government's infrastructure investment drive is starting to show up in stronger production of metals, building products, and trains."

Indeed, statistics from the Ministry of Industry and Information Technology showed production in the building products, chemicals, nonferrous metals and auto industries have all ended their previous declines.

Zhang Lin, an analyst from LGMI Research, a steel industry research institute, told China Daily that China's average daily steel output has climbed from 1.89 million metric tons in August to 1.93 million tons in September.

"The European Central Bank's unlimited bond-purchase program, the strong anticipation of the advent of the United States' quantitative easing, and the Chinese government's rapid approval of infrastructure projects led to a recovery of confidence, which resulted in the price rise since mid-September," Zhang said.

But Zhang also cautioned that whether steel prices would continue rising is unknown, given that it would take months for the local governments to raise money to start the construction of the approved projects.

Infrastructure and housing-related construction use the lion's share of steel. Whether investment in these sectors would rally is critical to China's steel industry.

However, dropping profitability and overcapacity still weigh on China's steel and other industrial sectors. Zhu said that from January to August, the net profit of industrial enterprises above designated scale declined 3.1 percent over a year ago, and in August, the profit further dipped to 6.2 percent from 5.4 percent in July.

Zhu also drew a line between the current stabilizing and the quick rebound of growth in late 2009, when the government's massive stimulus package boosted the economy, saying that this time, the recovery will be a slow process.

zhengyangpeng@chinadaily.com.cn