China's economy picks up pace
China's economy regained speed in the final quarter of 2012, pulling out of a post-global financial crisis downturn that produced the slowest year of economic growth since 1999.
Evidence of a burgeoning recovery in exports, stronger than expected industrial output and retail sales, together with robust fixed asset investment, all signalled that Beijing's pro-growth policy mix has gained sufficient traction to underpin a revival without yet igniting inflationary risks.
Year-on-year growth of 7.9 per cent in the fourth quarter beat a consensus forecast of 7.8 per cent in a Reuters poll.
Full year growth of 7.8 per cent was also just ahead of the poll's 7.7 per cent call and comfortably ahead of the government's own 7.5 per cent target, which just months ago seemed to some economists to be in jeopardy.
"It's kind of like a golden spot - stronger growth, but not strong enough to trigger a lot more inflationary concern. That's perfect for equity markets." said Dariusz Kowalczyk, Asia ex-Japan senior economist and strategist at Credit Agricole CIB in Hong Kong.
"What everybody wants is growth that's strong enough to give us peace of mind that revenues will increase and there is no hard landing risk, but not excessive, not strong enough to trigger inflation. And this is what I think we are getting. I'm bullish on China still."
Market reaction was generally upbeat, with Asian shares advancing and platinum and palladium following suit, while oil traders took the opportunity of data confirming the recovery to book profits after two sessions of steep rises.
China's new leaders must stabilise the economy this year to keep employment high while avoiding a surge in housing prices and inflation that could undermine reforms needed to overhaul the country's export-oriented growth model.
Without stability, incoming President Xi Jinping and Premier Li Keqiang, who are set to be confirmed in March, have no chance of delivering a slew of reforms they say are needed to tackle a host of financial, industrial and income imbalances that threaten China's future.
China's statistics chief, admitting the country's wealth gap was "relatively large", released a recalculated indicator of economic inequality today, the first time in several years that officialdom has addressed the sensitive issue head-on.
China's Gini coefficient stood at 0.474 in 2012, down from 0.477 in 2011 and from a peak of 0.491 in 2008, Ma Jiantang, the head of the National Bureau of Statistics, told reporters at a press conference on 2012 economic performance.
The index ranges from 0 to 1, with the 0.4 mark viewed by analysts as the point at which social dissatisfaction may come to a head.
Quarter-on-quarter growth of 2.0 per cent was below the market's expectation of a 2.3 per cent rise, which was taken as a sign that the recovery's momentum is not strong enough to worry the authorities into pre-emptive action to snuff out any whiff of inflation - China's long term policy pre-occupation.
The People's Bank of China, which cut interest rates twice in mid-2012 and cut banks' reserve ratios (RRR) three times since late 2011, has since switched to short-term cash injections via open market operations to guide monetary policy, apparently wary of fanning price pressures or encouraging a property bubble.