The news will be greeted quietly, but with thanks in Australia where our current economic and monetary policies are based to a large degree on the China rebound story.
The Reserve Bank and Federal treasury will all breathe a sigh of relief that the Chinese economy seems to be back on track, thanks to the huge Government stimulus spending campaign that has seen hundreds of billions of dollars injected into what was a stagnant economy last December-February.
Now China is growing, on track to top the official 8% target this quarter, thanks to all that new spending cascading through the economy.
Figures out in Beijing yesterday said the economy grew at an annualised rate of 7.9% in the June quarter, up from 6.1% in the March quarter.
For the six months top June, the second quarter grew 7.1% from the same period of 2008.
Official figures were released by the country’s National Statistics Bureau.
The spending boom has sparked an enormous surge in the stockmarket which hit 13 month highs on several days this week and moved past the Japanese market in terms of value at the close Wednesday.
Fixed asset investment rose strongly, up 33.5% for the June half, compared to the same period in 2008.
That’s the Government stimulus spending at work; but it is also a sign of an economy unbalanced and relying more on artificial stimulus than on any long lasting upsurge in demand.
It was something a commentary with the official figures admitted.
"The base for recovery is still infirm, the momentum for picking up is unstable, the recovery pattern is unbalanced, and thus there are still uncertain and volatile factors in the recovering progress,” the commentary said in translation.
Inflation is under control in the first half of the year, with the consumer price index falling by 1.1% from a year ago and 1.7% in June alone.
Government spending has boosted investment; seems to be sparking a recovery in property house prices; is keeping retail sales growing, but not doing very much to help exports.
They were down 21% in June, according to unofficial figures.
Not as bad as May’s steep 25% fall, but not good as demand offshore in the west remains sluggish.
Imports fell 13% in June, compared to much bigger, 20% plus falls in the preceding five months, a sign of the economy sucking in more raw materials, even if they are cheaper, such as oil, gas, coal and iron ore.
Air reported earlier this week that iron ore exports were up 29% in the first half of this year, with steel production running at near record levels in the past quarter of over 50 million tonnes a month and heading for a record annual figure of 550 million tonnes or more.
Imports of other raw materials have hit record levels, such as copper and aluminium, but now there’s growing suggestions that China has decided to stop stockpiling for the time being.
Power generation rose in June for the first time in 9 months. That’s become a closely watched indicator in the west.
Car sales were up 48% in June after rising 47% in the month before.
That’s helping chew up a lot of steel, and iron ore and coal from countries like Australia.
Sales of locally made cars jumped 36.6% as well in June: total sales were 1.1 million units, or more than in the US.
Chinese retail sales, the main gauge of consumer spending in the world’s third largest economy, rose 15% in June compared to the previous year.
In the first six months of 2009, retail sales also jumped 15%, compared with the same period the previous year, according to the National Bureau of Statistics.
The June figure was down from 15.2% year-on-year growth in May.
That’s a small; niggle that everyone will overlook, but if they don’t improve over the rest of 2009, you’d have to wonder what China will do for a growth encore next year.
China has been trying to boost consumer spending as a way to mitigate the impact of the global financial crisis, which has seen the country’s crucial export sector hit by a fall in demand from the United States and Europe.
For all of last year, retail sales were up 21.6%, that’s a big difference.
Figures out Wednesday showed reserves hit a record $US2.13 trillion at the end of June, the highest ever. It was up a strong $US175 billion or more (Just $US7.7. billion in the first quarter).
Valuation effects from a weak dollar and stronger euro and yen might have had an impact, but some analysts reckon there was a surge of so-called hot money into China in the quarter as global fund managers and other investors got more confident about the strength of the recovery engineered by the Government’s $$US585 billion of stimulus spending from national, state and local government).
The fall in the trade surplus in the June half compared with a year ago, meant there was less money added to reserves, foreign direct investment fell 17.9% in the six months to just over $US43 billion, leaving analysts to look for hot money inflows.
Chinese banks (which are the Government in another guise) have been throwing money at business and others across the country with loan growth in the first five months of the year more than budgeted for by the Government.
The central bank is getting worried; there have been warnings from officials and from other regulators about untoward lending, and this week the People’s Bank of China
