Beijing (AsiaNews/Agencies) – Investments in China increased by 40% in May. But experts believe that the weak signs of recovery are the result of heavy government investments that will amount to over 4 trillion Yuan (over 400 billion euro). Meanwhile the service industry is facing great difficulties.
Investment in urban areas in fixed assets such buildings and roads rose 40% compared to 2008 (up 6.8% in the first five months of 2009). The mainland's exports fell 26.4 %in May from a year earlier, while imports fell 25.2%. The General Administration of Customs said after seasonal adjustment, exports rose 0.2% per cent in May from April and imports rose 4.4 %.
Economists agree that the signs of recovery are the direct result of financial investments announced by the government amounting to 4 trillion Yuan (400 billion euro). Since the stimulus was announced in November, China has built 20,000 kilometres of rural roads, 445 kilometres of highway and 100,000 square meters of airport buildings. Some experts are optimistic and note that current orders for manufactured goods were made months ago, when fears for the global crisis were at their worst.
Instead others believe that the improving situation in the home market is only the result of these state investments, which they believe to be insufficient in really kick-starting a lasting economic recovery.
Feng Yuming, a Shanghai economist, observes that “External demand remains weak as the US and European economies are still contracting, so it'll be hard for China's exports to see a quick rebound”.
Banking expert Xing Zhiqiang comments to the South China Morning Post “The growth momentum of investment is really dramatic, and we expect that momentum to continue in the next two or three quarters”.
Now the crisis is hitting not only the manufacturing sector but also the service industry, affected by a drop in consumption, but also by delinquent payments, bad debts and even bankruptcy. In the first quarter of 2009 earnings across the sector was down 3.3%. In a letter published in February to central authorities the China Federation of Logistics and Purchasing, warned that “Clients are delaying payment. Some upstream clients have gone bankrupt or reneged on debt repayment; the risk of bad debts has increased. Many Chinese logistics firms have delayed or cancelled investment plans”.
