China's still credit driven, India generating positive news: S&P

SINGAPORE – In an assessment of regional economies, ratings agency Standard & Poor's says that China's first-quarter GDP growth came in on target at 6.7% but remains too credit driven, while India's growth story improved on a pick-up in industrial production and projections of a good monsoon season. Japan, S&P says, is still struggling to reflate.

"We believe China's GDP growth is still too high, given that relatively fast credit growth appears needed to achieve the growth target range," said Paul Gruenwald, S&P's Asia-Pacific chief economist.
 
"Moreover, the necessary structural reforms to State-owned enterprises and the financial sector are progressing too slowly."

S&P says signs of a meaningful reflation in Japan remain few and far between. The strong yen - paradoxically benefitting from safe haven flows - is imparting a negative impetus to growth.

“India generated a slew of positive news and data over the past month. The Government passed a sensible budget with a focus on (much needed) rural spending.

"More pieces of India's 8% GDP growth story this fiscal year are falling into place. The budget looks prudent, and industrial production finally seems to be responding to higher consumer spending. Perhaps most importantly, this upcoming monsoon season is projected to bring above average rainfall," Gruenwald said.

The report also noted that financial markets in the region have calmed following the relatively upbeat data flow. www.standardandpoors.com (ATI).