Boston, MA -- (SBWIRE) -- 11/19/2012 -- BMI maintains its cautious outlook for the Chinese freight transport sector, highlighting that indicators continue to align to back our view of a slowdown in China's economic growth. There is growing evidence that the economy is close to contraction. We do not expect a recovery any time soon, as structural forces will keep growth relatively weak and highly susceptible to negative shocks. We forecast headline real GDP growth to come in at 7.5% and 7.0% in 2012 and 2013 respectively. Data for the first four months of the year show volumes in air freight and inland waterways in line with our macro view.

These monthly results support our view that a noticeable slowdown in Chinese economic growth is set to come into effect during our forecast period. Our core view on Chinese growth is that we are past the boom phase and we are entering a period of much weaker expansion. The slowdown in the construction sector will result in less demand for imports of goods such as iron ore and coal, while ports and shipping lines alike are feeling the effects of a gradual contraction in China's overseas trade volumes over our midterm forecast period. Although this moderation in growth is expected to be soft, concerns over the possibility of a sharper contraction in Chinese bilateral trade adds a degree of downside risk to our projections.

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Headline Industry Data

- 2012 air freight tonnage is expected to contract by 3.0%.
- 2012 rail freight is forecast to grow by 3.7%.
- 2012 Port of Shanghai throughput is forecast to grow by 5.2%.
- 2012 road freight is forecast to grow by 6.0%.

Key Industry Trends

Air China Cargo Chasing Growth In Intra-Asia

The trend of interest from major freight companies in the intra-Asia market, first noted in the container shipping sector, is now picking up pace in the air cargo market. Air China Cargo, the freight subsidiary of Air China, is reportedly preparing to launch a cargo service linking China with Vietnam, the airline's second cargo venture into Asia in 2012.

Chinese Railways Still In Trouble

Despite the upbeat headlines, Beijing's decision to boost its railway construction spending target by 14% in 2012 to CNY470bn should not be regarded as aggressive stimulus. On the contrary, the decision to turn attention back towards a sector already plagued by overcapacity, massive debt levels and poor earnings prospects is a clear sign to us that there are precious few fresh options at the government's disposal to reignite economic activity this time around.

Vale Navigates China Problem With Storage Vessel

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