Analysts: China’s growth not necessarily a bubble

China’s efforts to curtail its economic growth have not hurt the local stock market, and some analysts are saying the country’s rapid growth is not a bubble.
The Shanghai Stock Exchange Composite Index yesterday climbed 1.04 percent, or 41.97 points, after a 3.17-percent plunge in the morning.
On Friday, the People’s Bank of China, the central bank, raised the standard loan interest rate by 0.18 points to 6.57 percent, widened the yuan’s daily trading range to 0.5 percent from 0.3 percent and increased the required cash reserve rate for commercial banks by 0.5 percent to 11.5 percent, to take effect June 5.
Some analysts said China’s heated growth, especially in the stock market, is simply the result of its quick expansion.
“China’s economic growth is not a result of overheating and the lending rate is still low,” Kim Ji-hwan, an analyst at Hyundai Securities, said in a report. “The recent rate increase is not a curtailment policy.
“China’s economy has grown 9.8 percent on average for the last 10 years, and the 11.1 percent growth in the first quarter is only due to the brisk economy,” Kim said.
Kim also said in the report that the Korean stock market’s recent strides have had more to do with the American stock market than China’s.
The recent moves by China are seen as defensive measures ahead of the ministerial Strategic Economic Dialogue meeting between the United States and China this week in Washington, D.C., analysts said, calling the measures not strong enough.
“The three measures together ― the currency, interest rates and the cash reserve rate ― have had a demonstrative effect but are not strong enough to create a fundamental shock,” said Hwang Geum-dan, an analyst at Samsung Securities. “It is not going to hit the global market as it did in 2004.”
China’s government raised its required cash reserve rate by 0.54 percentage points that year to 7.5 percent, causing the global markets to crash.

By Limb Jae-un Staff Writer [jbiz91@joongang.co.kr]