China’s GDP growth may have soared 8% in 4Q12

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According to DBS, China’s GDP growth is projected to advance 8.0% YoY in 4Q12, from 7.4% in 3Q. Growth is set to conclude 2012 at 7.8%, beating the government’s target of 7.5%. Growth momentum has notably accelerated in 4Q, supported by improvement in external trade and faster fixed asset investment (FAI).

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Exports and imports rose 9.4% and 2.8% respectively in 4Q, versus 4.4% and 1.4% in 3Q. As sluggish global growthdampened trade activities for the most part of last year, exports and imports advanced only 7.9% and 4.3% respectively in 2012, versus 20.3% and 24.9% in 2011. Weaker import growth caused the trade surplus to surge to USD 231bn in 2012 from USD155bn in the previous year.

Thanks to better economic performance in the US and Asia, exports are expected to grow at double-digit rates this year. The consumption component of GDP is much steadier than the erratic trade component.Private consumption in China is usually well insulated from external shocks. Despite a gloomy external environment, nominal retail sales likely have grown 15% in 2012 versus 18% in 2011.

Looking ahead, better consumer sentiment overall will support at least 16% nominal retail sales growth in 2013. Meanwhile, FAI has begun to speed up noticeably since September as project approvals quickened. Full-year FAI growth for 2012 is projected to be 20.7%. We anticipate a notable rebound beginning 1Q13 as new leaderships usually exhibit pro-growth
policy bias.

In addition, China’s strategy to accelerate urbanization calls for more infrastructure investment. Indeed, there are signs that FAI is already picking up in the non-transport infrastructure space (water conservancy, electricity, gas and water production). On the other hand, growth of real estate FAI is expected to remain steady in 2013 (2012E: 22.0%) as Beijing maintains a firm grip on the property sector. 

The new leadership will likely keep monetary policy prudent as interest rate cuts can spur surges in property prices, as seen in June and July last year. In addition, inflation expectations remain elevated. The latest CPI reading (Dec: 2.5%) serves as a warning signal.