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China Q2 growth quickens

uk.reuters.com

China Q2 growth quickens

BEIJING  – China’s economy gathered momentum in the second quarter thanks to massive fiscal and monetary stimulus, leaving the government’s full-year growth target of 8 percent within reach.

Annual gross domestic product growth accelerated in the second quarter to 7.9 percent, up from 6.1 percent in the first quarter, making China the best-performing major economy in the world. Economists polled by Reuters had forecast 7.5 percent.

A string of accompanying data for June from the National Bureau of Statistics depicted an economy successfully making up for a slump in exports through domestic demand, both investment and consumption, generated by a 4 trillion yuan (357 billion pound) pump-priming package and record bank lending.

“It’s very encouraging, the 8 percent growth target is in sight,” said Daniel Soh, economist at Forecast in Singapore.

“It’s by now clear that the fiscal stimulus package has offset the contraction in export activity.

The statistics office, however, offered a word of caution, saying a lasting recovery was not yet secure.

“The base for recovery is still weak. Growth momentum is unstable. The recovery pattern is unbalanced and thus there are still uncertain and volatile factors in the recovery process.”

Investment in fixed assets in urban areas grew 33.6 percent in the first half, up from 32.9 percent in the first five months, while industrial production growth quickened to 10.7 percent in the year to June from 8.9 percent in the 12 months to May and beating analysts’ forecast of 9.4 percent growth.

Retail sales, a rough proxy for consumption, rose 15.0 percent in June from a year earlier after May’s 15.2 percent increase.

Economists said the data gave Beijing every chance of achieving 8 percent growth for all of 2009 — the minimum deemed necessary to hold down unemployment, and the rate forecast by economists polled by Reuters last week.

Europe’s biggest bank, HSBC Holdings raised its 2009 growth forecast for China to 8.1 percent from 7.8 percent after the data. It also revised its 2010 forecast to 9.5 percent from 8.5 percent.

A few months ago, in the depths of the global recession, such strong growth appeared fanciful to many China-watchers.

Now, the central bank, nervous at the record pace of bank lending, has begun to tap gently on the monetary brakes, selling more of its paper to soak up cash and nudging up money market rates.

But economists believe the political imperative of putting growth on a solid footing is so great that the central bank will not threaten the recovery by raising interest rates any time soon.

Moreover, the depressed growth rates of late 2008 will offer an increasingly favourable base of comparison as this year wears on. As a result, GDP growth in the second half is likely to be higher than the 7.1 percent first-half rate reported on Thursday.

Unlike developed countries, China does not yet publish quarter-on-quarter GDP data, which give a better sense of current momentum than year-on-year growth rates.

But most banks produce their own estimates, and they show China building up a strong head of steam in the second quarter.

Goldman Sachs had forecast 7.8 percent second-quarter growth, which it said translated into 16 percent compared with the first quarter when expressed as a seasonally adjusted annualised rate.

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Next sales on target as online business outperforms

Total sales at the clothes retailer between 1 August and 24 December rose 3.1% compared with a year earlier, ignoring the effect of rising VAT.Next Directory sales grew 16.9%.
But its High Street business, which sees some two-thirds of sales, recorded a 2.7% fall, sending Next’s share price 4.3% lower in early London trading.Next has seen its share price rise 39% over the past 12 months, easily outperforming a 5% fall in the broader FTSE 100 index.Shares in some other big retailers also fell in the wake of Next’s announcement, which was the first trading update of the year from a major High Street chain.

Home Retail Group – owner of Homebase and Argos – dropped 4.7%, while car accessories chain Halfords was down 3%.
Profit margins
Next reconfirmed its full-year profits forecast at £565m, narrowing the range to plus-or-minus £7m.
The total sales growth figure of 3.1% was in the middle of its previous guidance of 2.5% to 4%, despite the “slightly disappointing” numbers from its 500 stores.

Next expressed uncertainty in its statement as to why the High Street performance had been so weak, particularly considering that last year’s sales had been hurt by cold weather.One possibility cited in its statement was its long-standing policy of not cutting the price of its products in the run-up to Christmas.

“Next’s own admission of disappointment is a setback to its hitherto robust growth story,” said Richard Hunter, head of equities at brokerage Hargreaves Lansdown.

“The fact that the company did not discount its products in the approach to Christmas may have been a factor, whilst the more general consumer malaise has yet to be corroborated by updates from its rivals.

“In addition, higher sales do not necessarily translate to higher profits, so the fact that the company has been able to maintain operating margins may yet play into its hands.”

Richard Perks, analyst at research firm Mintel, confirmed this view.

“These figures from Next are really pretty good I think,” he told the BBC.

“OK, Next may be – in sales terms – held back by the fact that it wasn’t discounting, but in profit terms it will be a lot better off.”

Mr Perks said he was optimistic about retail sales across the UK – predicting a 4% rise in December.

“People are reluctant to cut back any more on retail, and are cutting back elsewhere, particularly on leisure,” although he added that the rising cost of food was still crimping spending.

Next said it was cautiously optimistic about its end of season sales – which began after the end of its latest reporting period – and expected results to be slightly ahead of budget.

The retailer said it expected sales this year to be helped by a probable freeze in the price of its products.

It forecast generating £200m surplus cash in the year ahead, which it said it would return to shareholders via share buybacks.

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China quake survivors spend second night in freezing cold

Battling bitingly cold weather and a lack of oxygen, rescue workers clawed with their bare hands through the rubble of homes and schools toppled by the 6.9 magnitude quake that hit Yushu county in Qinghai province on Wednesday.

Officials said medical teams and supplies such as tents and quilts were on their way to the zone, where doctors set up makeshift hospitals to treat victims of the deadliest quake in China in two years.

But thousands spent another night without shelter in freezing temperatures after the quake destroyed almost all the mudbrick and wooden houses in Jiegu, the local capital, and flattened schools.

“I lost my husband and I lost my house,” Gandan, a Jiegu resident, told AFP, her son and daughter at her side. All three were living in a tent with other people, with one bowl of barley to share.

“We don’t know what to do, we have no food,” she said, standing by the tent a stone’s throw from her collapsed mud and brick house.

China quake devastates stunned town

The number who perished rose to 760, including dozens of children, while 11,477 were injured, the official Xinhua news agency said, quoting rescue coordinators.

The death toll is expected to rise further, with 243 still buried, and local officials say they were short of medical supplies and large digging equipment.

“The rescue job in this disaster zone faces many difficulties,” said Miao Chonggang, of the China Earthquake Administration, which is coordinating more than 7,000 rescuers.

President Hu Jintao cut short a Latin American tour and Prime Minister Wen Jiabao postponed a trip to Southeast Asia.

Hu told a news conference in Brasilia the quake was “a huge calamity which resulted in big losses of human life”.

Chinese president calls quake ‘huge calamity’

Wen on Thursday visited the quake zone, an underdeveloped area of the Tibetan plateau known as the “Roof of the World”.

“The top priority is to save people. We will never give up even if there is only a slim hope,” Wen told a meeting at the quake-relief headquarters in Yushu, according to Xinhua.

Soldiers, police and firefighters used shovels, iron bars and bare hands to dig through the mangled piles of concrete and rubble from 15,000 toppled homes.

Foreign governments offered help as international aid officials warned that the priorities would be providing shelter, medical aid, food and water and ensuring sanitation to prevent the spread of disease.

Meanwhile tens of thousands of Internet users have been showing their solidarity with the quake victims by posting virtual flowers in online “mourning halls” and donating to appeals, Xinhua said.

Jiegu lies around 800 kilometres (500 miles) by road from the provincial capital Xining, about 4,000 metres above sea level, meaning rescue workers from outside the region struggled to cope with the lack of oxygen.

The government said electricity and phone links had been restored to dozens of towns but the difficult terrain, including deep canyons, and the bitter cold and remoteness of the area were hampering rescue efforts.

Dazed survivors told harrowing stories of loved ones crushed under their homes.

“There are 10 people in my family and only four of us escaped. One of my relatives died. All the others are buried under the rubble,” Samdrup Gyatso, 17, told Xinhua after his two-storey home crumbled.

Facts on China quake zone

Among the dead were at least 66 pupils and 10 teachers, Xinhua said, quoting local authorities, as grieving parents waited for news near the ruins of the schools, where discarded school books and clothes lay.

Xinhua said a baby boy had been born in a tent near the epicentre shortly after the quake.

“It must be the first life that came to the world after the disaster,” Huang Changmei, a doctor, told the agency.

“The baby brought hope to the ruined place.”

The devastation was reminiscent of the huge quake in May 2008 in Sichuan province, where thousands of children were among 87,000 deaths when their shoddily-constructed schools collapsed.

Schoolbooks strewn in China quake rubble as children perish

Xu Mei, of the education ministry, denied a media report that around 200 children had been buried in the ruins of a primary school in Wednesday’s quake.

In Beijing, Zou Ming, the head of the government’s disaster relief department, said nearly 40,000 tents, 120,000 articles of clothing, 120,000 quilts and food were being dispatched.