As the country’s export growth is expected to plummet to 10% in 2012, a mere half of its growth in 2011.
DBS also expects the country’s export growth to have plunged to 14% in December.
Here’s more from DBS:
Although the manufacturing PMI rebounded to 50.3 in December from 45.6 in November, the export orders component (48.6) is still in the contraction territory.
December’s export and import growth are projected to decelerate to 13.5% YoY and 15.0% respectively, down from November’s 13.8% and 22.1%. This puts 2011’s export and import growth at 20.4% and 25.2%, rounding up the trade surplus to US$150.6bn (approx. 2.1% of GDP), down from 2010’s US$181.5bn (3.0% of GDP). Looking ahead, the deterioration in the eurozone will likely hammer export growth to 10% in 2012.
Domestic demand is likely to remain buoyant. Retail sales growth, which has proven quite resilient to the crisis thus far, is likely to hold up steadily at 17.3%. Private consumption in the months ahead will be bolstered by rising wages.
Shenzhen has announced it will increase the minimum wage by 13.6% and Sichuan by as much as 23.4%. Urban fixed asset investment is expected to maintain 24.3% growth YTD. Real estate investment (about 25% of total urban FAI) has maintained about 33.8% growth YTD despite the moderation of property prices seen in 2H11. It will contribute 30% to the overall urban FAI growth rate, similar to 2010.
General liquidity conditions, however, have remained tight. Even though new loans may reach CNY 600bn in December, versus CNY 562bn in November, overall loan growth will probably fall further to 14.1% from 15.6% previously, against the projected M2 growth at 12.7% in December.
The retreat of headline inflation to 4.2% in November has prompted market speculation of another RRR cut before Chinese New Year. Although the CPI is set to trend further down to 4.1% in December, and the PPI to 2.0% from 3.0% in November, the facts only provide necessary, but not sufficient conditions for substantial monetary loosening due to the legacy of rampant credit expansion in 2009.
The stock of M2 to GDP has barely retreated even when projected M2 growth in 2011 at 12.7 % is near historical lows. In other words, there is still more money chasing goods compared with 2008. The pace of relaxing monetary policy will likely be slower than previous loosening cycles.
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