Look for China's first quarter GDP numbers tomorrow--here are my suggestions on how to figure out what they mean for growth in 2012

04/11/2012 5:53 pm EST


Jim Jubak

Founder and Editor, JubakPicks.com

I think we can call this “restrained easing.”

Economists surveyed by Caixin estimate that China’s commercial banks lent 790 billion yuan ($115 billion) in March. That would be an increase from the 710 billion yuan lent by banks in February. The same group of economists estimates that money supply, as measured by M2, grew at an annual rate of 12.8% in March. That would be a slight drop from money supply growth in February.

Why are these estimates important right now? Because after inflation moved up to 3.6% in March from 3.2% in February, New York, Hong Kong and Shanghai got to fretting that, maybe, the higher inflation rate would constrain moves by the People’s Bank of China to expand the money supply to boost economic growth in China.

And we keep getting data that suggests the Chinese economy could use some stimulus. For example, export/import numbers out yesterday showed exports grew at an annual 8.9% in March—decent strength—but imports increased at just a 5.3% annual rate. That’s worrying since the usual reason for a slowing in China’s import growth is a decision by China’s manufacturers to cut back on their imports of raw materials because they see slower economic growth.

China reports first quarter GDP numbers tomorrow and economists are expecting to see the annual growth rate slow to 8.4% from 8.9% in the fourth quarter.

Until this weeks inflation-induced worries, the thinking was that a slowing growth rate like that would produce one or two cuts to bank reserve requirements—beginning in the next month or so--that would give China’s banks more money to lend.

The seasonal pattern is for manufacturing activity to rise in April in China. That would increase the need for capital—as well as add to demand for loans from China’s businesses.

Watch the new bank loans figure for April to see if that surge in lending materializes. It would be a sign that growth is either picking up or at least slowing less quickly as we approach the midpoint of the year. Optimists on China—and that includes your truly—think that China’s growth rate will bottom sometime around the middle of the year.
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