THE Chinese Communist Party with its vast resources and many levers has once again defied the doomsayers, with new figures showing the economy strengthened in the second half of 2012.
The December-quarter gross domestic product growth rate of 7.9 per cent was faster than expected and up from 7.4 per cent in the September quarter, a three-year low.
Incredibly, the growth rate for the full calendar year, 7.8 per cent, was the lowest since 1999.
The figures help explain a rebound in commodity prices, particularly iron ore, after falling prices had dented Australia’s terms of trade during the year.
But the recovery in growth postpones what will be a difficult readjustment when policymakers finally confront the costs of relatively unchecked administrative and financial powers. As well as artificially inflating the luxury jewellery market, unchecked power is believed to have skewed income distribution towards savings and investments by governments and large corporations, at the expense of households, the services sector and consumption.
Officials will also be forced to tackle a growing tangle of opaque and often circular financing involving local government trust companies, banks and state-owned firms.
Central bank figures earlier this week showed trust loans rose 679 per cent to 264 billion yuan ($40.4 billion) from a year earlier, accounting for 16 per cent of aggregate financing. Industry participants privately warn of a new growth industry involving circular loans between banks, security firms and bank debtors.
A two-sentence announcement shortly before Friday’s GDP data release added to suspicions that not all of the rivers of finance and frenetic activity is going to productive use.
The head of one the party’s central organs, the minister-level head of the Translation Bureau, “has been removed from post for ‘improper lifestyle’,” said news agency Xinhua.
He was sacked after a woman claiming to be his mistress posted a 120,000-word expose on how postings were allocated according to a complex trade in finance, jewellery and other favours.
“I knew there was a price to pay to work for the bureau,” she wrote. “I had already paid 10,000 yuan. I was trying to figure out what he wants, money or me …”
The case is one of a series that originated with an online expose rather than the government’s own investigatory agencies (which also suffer rampant corruption).
The new party boss, Xi Jinping, has presented himself as an economic reformer in the style of former paramount leader Deng Xiaoping. But his reforms all require the party to reduce its control of resources and administrative decision-making, which will not happen without a fight.
In the meantime, the Australian economy will continue to be driven by Chinese steel mills and China bears will continue to push back their forecasts of a “hard landing”.
Friday’s Bureau of Statistics figures showed growth accelerated from an annualised rate of 6 per cent in the March quarter to 8 per cent in the December quarter.
Year-on-year growth in the commodities-intensive heavy industry sector rose to 10.6 per cent in December, despite steel production growth easing from 16.5 per cent to 13.5 per cent and that of cement falling from 9.4 per cent to 5.4 per cent.
Light industry growth accelerated to 9.6 per cent despite trying export conditions.
HSBC predicts 8.6 per cent growth for 2013, even as Chinese leaders have been conditioning expectations for slower and more stable growth.
“The doomsayers got it wrong yet again,” an economist and investment strategist in Beijing for AustralianSuper, Stephen Joske, said.
“The financial system itself is fairly safe from contagion because it’s government owned.
“The fears some people had that the commodities boom was over is pretty well wrong, it’s [just] moving into a new phase.”
The original release of this article first appeared on the website of Hangzhou Night Net.