China is beating the global recession faster than expected and better than any major economy.
On Thursday, economists scrambled to notch up their China forecasts for this year and 2010, as Beijing released new growth figures driven by the government’s unprecedented 585 billion dollar economic stimulus injected last November.
Latest data shows that China’s economy expanded by 7.9 per cent during the year’s second quarter, compared to 6.1 per cent in the first quarter.
“The government stimulus has been very effective first in terms of cushioning the downturn, and now in driving a recovery,’’ Vivek Arora, senior resident representative of the International Monetary Fund, told HT in Beijing.
During the year’s first half, China struck 7.1 per cent growth, surging close to the year’s target of eight per cent growth that seemed uncertain a few months ago. “Looking ahead, we expect the economy to continue growing solidly,’’
said a statement from J P Morgan Chase Bank, Hong Kong.
Last year, China — the world’s third-largest economy that hit 13 per cent growth in 2007 — slowed to a seven-year-low of nine per cent growth as tumbling global demand for Chinese exports led to mass factory closures and millions of job losses.
As world demand dwindled, local Chinese governments urged villagers to go shopping for their first cars, bikes, computers, refrigerators and dozens of appliances sold on new rural subsidies.
Since November, Beijing pumped massive investments to boost demand and create jobs by building infrastructure across China. The stimulus included a stunning 126.5 per cent increase in investment in railway infrastructure (almost 2,000 km of new tracks laid this year) and a 54.7 per cent increase in highway investment this year.
Now factory output, car and property sales are climbing, but Beijing officials warned that challenges remain, including graduate unemployment and inadequate domestic demand. The revival is still fragile, economist Fan Jianping of the State Information Centre was quoted saying on Thursday in the official media Xinhua. The spokesman of China’s National Bureau of Statistics, Li Xiaochao, told the media that the revival is not on solid footing and the economic structure is still unbalanced.
In Beijing, economist Tao Wang who heads China economic research at UBS Securities, raised China’s 2009 and 2010 GDP forecasts to 8.2 per cent and 8.5 per cent.
“The government’s massive economic stimulus...helped push investment higher while exports continued to decline,’’ said a statement from Tao, who had forecast 7 per cent growth for the second quarter. “Policies to promote consumption, including tax rebates for household appliances, helped sustain consumer demand, while government consumption is likely to have risen.”