07/16/2009, 00.00
CHINA
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Economic growth reaches 7.9 per cent, is China booming again?

GDP growth surges in second quarter. Consumption and industrial output are up as inflation remains under control. For experts, funding by the government and state banks are behind the rise, but warn that instability and volatility remain.

Beijing (AsiaNews/Agencies) – China’s economy jumped in the second quarter, with GDP expanding by 7.9 per cent over a year earlier. Investors reacted positively to the news, sending the Shanghai Composite up 0.7 per cent whilst the Hang Seng index in Hong Kong added 2.1 per cent by midday.  Economists warn though that the surge was driven by the government’s aggressively loose fiscal and monetary policies, and that recovery remains shaky.

Li Xiaochao, a spokesman for the National Bureau of Statistics, said the economy “had stabilised with increasing positive changes”. At the same time he said that recovery was “unbalanced” and there were still “uncertain and volatile factors” at work in the economy like unemployment. Job creation remained a priority.

In the first quarter the economy grew only by 6.1 per cent, lower than expected over a year before.

But inflation is under control with the consumer price index falling by 1.1 per cent from a year ago and 1.7 per cent in June alone.

Retail sales figures also remained strong in the first half of the year, rising by 15 per cent from the same period last year in a sign of greater confidence that the economic recovery is finally underway and that consumers have more disposable income.

China's industrial output grew by 9.1 per cent in the second quarter of this year over a year earlier.

Renewed growth was driven by record lending by state banks to businesses.

Many projects funded by the government also reduced unemployment figures among migrant workers who lost their job when tens of thousands of plants closed, especially in the export-oriented sector.  

This has led some economists to express some cautious optimism.

Lu Ting, an economist at Bank of America-Merrill Lynch in Hong Kong, said that if banks continue to lend growth could reach 10 per cent by the end of the fourth quarter.

Others point out however that social unrest has been widespread, especially in the field of labour relations, and that unemployment levels remain too high.

Many are concerned that the surge relies too much on the government’s 4 trillion yuan stimulus package (US$ 600 billion).

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