China's economic growth looks set to accelerate into the new year, with booming factories driving a December manufacturing survey to a 20-month high while South Korea's exports to the country surged on strong demand. The survey released on Friday also showed the rapid pace of activity pushed up prices of inputs such as labour, raw materials and capital to a 17-month high in China.
-- China official PMI hits 20-month high in December
-- Chinese economy to grow 9.5pc in 2010: thinktank
Potentially complicating efforts of officials who want to maintain growth-friendly policies without driving inflation expectations. The official purchasing managers' index (PMI) jumped to 56.6 in December from 55.2 in the previous month, the China Federation of Logistics and Purchasing said. It was the 10th consecutive month of expansion and the biggest monthly rise since March, reflecting that Chinese manufacturers, far from plateauing after a recovery, have actually gathered momentum heading into 2010.
"We expect China's strong economic growth momentum to continue in 2010, with the major source of growth coming from a broad-based improvement in private consumption, and further strengthening in private housing investment, and a solid recovery in exports," Jing Ulrich, chairman of China equities at J.P. Morgan in Hong Kong, said in a research note.
Chinese demand has given a welcome boost to economies of many neighbouring Asian countries over the last year as the region's traditional Western markets remain weak. South Korea, Asia's fourth-largest economy, said on Friday that its exports to China between December 1 to 20 were up 74.4 percent to $54.23 billion, while exports to the United States in the same period grew only 8.7 percent to $19.04 billion. Overall Korean trade figures for December rose much faster than expected from a year earlier, indicating world trade was recovering quickly from the financial crisis and paving the way for an interest rate increase in Korea soon.
Exports during the final month of 2009 grew 33.7 percent from a year earlier to $36.24 billion, blowing away the median expectation for 25 percent growth. Imports gained 24.0 percent over a year earlier to $32.94 billion. South Korea, home to global suppliers of ships, cars and electronics gadgets, is the first major exporting economy in the region to release monthly foreign trade figures and is an early indication of trends in North Asian trade.
The Bank of Korea indicated on Thursday that rates will rise in 2010 at an appropriate pace. By contrast, China's central bank said this week that monetary policy will remain loose, though flexibility will increase, a reference to slightly tighter controls on bank lending.
Indeed, a slower expansion of new export orders for the second straight month in December supported the cause of officials who have been extremely cautious in winding down pro-growth policies. China's economy is expected by some analysts to grow more than 9 percent in 2010, increasing worries among some economists that deflation experienced through most of 2009 will quickly flip to inflation.
However, the State Council Development Research Centre, a leading national think tank, said in a report on Friday that China's gross domestic product would expand by 9.5 percent in 2010, thanks to robust real estate investment and mild inflation.
China's economy shot back to nearly double-digit growth in 2009 after nearly standing still at the end of 2008, giving a lift to Asia and countries such as Australia which have been able to feed its voracious appetite for commodities. The country's 4 trillion yuan stimulus package, complemented by a record surge in bank lending, propelled the economy to 8.9 percent year-on-year growth in the third quarter of 2009 and put it on track for even faster expansion this year.
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