Bank revises GDP growth

By Helen Yuan  |   2008-6-4  |     NEWSPAPER EDITION

CHINA'S gross domestic product will expand about 10.7 percent this year, Deutsche Bank said, raising its estimate to account for reconstruction spending following the worst earthquake in 58 years.

The German bank raised its 2008 economic growth forecast from 10 percent and estimated 2009 expansion of 9.7 percent from 9.3 percent previously. Spending to rebuild will exceed 500 billion yuan (US$72 billion) over three years, Ma Jun, a Hong Kong-based economist wrote in a note.

Spending will peak from the fourth quarter of this year to the second quarter of next year, boosting demand for cement, glass, machinery and steel, Ma said. The revisions were consistent with boosts to growth after earthquakes in India, Indonesia, Iran, Japan, Turkey and Pakistan, he said.

The spending would provide support for companies, including Asia Cement Corp, Shui On Construction & Materials Ltd, China Infrastructure Machinery Holdings Ltd, Yanzhou Coal Mining Co, Maanshan Iron & Steel Co, Doosan Infracore Co and Hitachi Construction Machinery Co, Ma said.

China's cement demand will rise by 61.1 percent in the year starting July 1 from the previous 12 months because of the reconstruction, compared with a previous estimate of 12 percent, according to the report.

Demand for construction glass will rise by 39.2 percent for the same period, versus the previous forecast of 18 percent, and steel demand will rise by 14.3 percent, against 12 percent, the bank said.

Reconstruction spending will begin boosting economic growth in the fourth quarter of this year, when it will add 1.4 percentage points, Ma said in a telephone interview with Bloomberg News.