China economy posts solid growth
Stock markets rally worldwide on back of better-than-expected growth in China.
Last Modified: 16 Jul 2009 13:43

China says it needs to maintain at least 8 per cent growth to avoid mass unemployment [EPA]

China's economy grew 7.9 per cent in the second quarter of 2009, the government has said, putting it on track to hit the stated goal of eight per cent growth for the year.

The year-on-year growth was well up from the 6.1 per cent registered in the first quarter, the National Bureau of Statistics said on Thursday.

The second quarter gross domestic product growth, built on the back of a $586bn government stimulus package, makes China the best-performing major economy in the world at the moment.

"It's very encouraging, the eight per cent growth target is in sight," Daniel Soh, an economist at Singapore-based consultancy Forecast, told the Reuters news agency.

Market reaction

China's latest economic data helped lift Asia-Pacific stock markets, already buoyed by upbeat US company earnings released on Wednesday.

By the end of Thursday's trade:

Tokyo's Nikkei 225 was up 0.8 per cent

 Hong Kong's Hang Seng gained 0.6 per cent

 Seoul's Kospi added 0.8 per cent

 Sydney's S&P ASX 200 was up 1.8 per cent

 Singapore's Straits Times was up 0.5 per pent

"It's by now clear that the fiscal stimulus package has offset the contraction in export activity."

Other government data for June back up the assertion that domestic investment and consumption had made up for falling exports to put Beijing within reach of the eight per cent annual growth deemed necessary to keep unemployment and social unrest at bay.

Investment in fixed assets in urban areas grew 33.6 per cent in the first half, up from 32.9 per cent in the first five months.

In the same period industrial production growth quickened to 10.7 per cent, up from 8.9 per cent in the 12 months to May beating analysts' forecast of 9.4 per cent growth.

Retail sales rose 15 per cent in June from a year earlier after May's 15.2 per cent increase, but consumer prices in June fell 1.7 per cent from a year earlier, easing fears that the massive government stimulus could trigger high inflation.

'Volatile factors'

The downturn has thrown thousands of factory workers out of their jobs [GALLO/GETTY]
China does not yet publish quarter-on-quarter GDP data, which give a better sense of current momentum than year-on-year growth rates, but estimates by banks paint an even rosier picture for the world's third-largest economy behind Japan and the US.

Goldman Sachs, for instance, which had forecast a 7.8 per cent second-quarter growth, said that translated into 16 per cent growth compared with the first quarter when expressed as a seasonally adjusted annualised rate.

The government has warned, however, that a long term recovery is not yet secure.

"The base for recovery is still weak," the statistic bureau said as it published the latest data.

"Growth momentum is unstable. The recovery pattern is unbalanced and thus there are still uncertain and volatile factors in the recovery process."

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