China to perform better in H2 after 7.9% expansion in Q2

16 July 2009 07:35  [Source: ICIS news]

By Judith Wang

SHANGHAI (ICIS news)--China, the world's third biggest economy, is on a clear recovery path and appears poised for stronger growth in the second half of the year thanks to the government's heavy spending, economists said on Thursday.

The country did not disappoint in the second quarter (Q2) with a 7.9% annual GDP growth, which represented a strong rebound from a record low 6.1% growth in the first quarter, largely due to its massive yuan (CNY)4,000bn ($586bn) fiscal stimulus package.

The government started implementing a host of fiscal measures to boost consumption this year to prevent the economy from caving in under the weight of the global economic recession and the collapse in external demand.

The strong Q2 numbers took away economists' doubts that China can achieve a full-year growth of 8%, which was initially deemed too ambitious a target. The economy grew an annual 7.1% in the first six months of 2009, based on government data.

“We could dare say the economy in the second half will [perform] better based on the current economic trend,” said Li Hongrong, an analyst from Shenzhen-based brokerage Ping An Securities.

“Under the government’s massive stimulus package and large-scale new lending, China’s economy will no doubt grow in the third and fourth quarters,” Yi Lei, an macroeconomist at Beijing-based Shanxi Securities said.

Yi said he expected China's GDP to grow 8.5% in the third quarter and 9.5% in the fourth quarter.

Official data showed China's fixed assets investments soared 33.5% year on year to CNY9,132bn, a reflection of the government's heavy economic pump-priming.

“The fixed assets investment rose sharply, proving the government’s economic stimulus package has taken a big effect. The figure will continue to grow in the second half of this year, likely making the full-year fixed assets investment growth above 35%,” Yi said.

In the first half of this year, the industrial output climbed 7.0% year-on-year, with a 9.1% growth in the June quarter.

Retail sales of consumer goods rose 15% to CNY5,871bn in the January-to-June period as prices fell. China's consumer price index (CPI) fell 1.1 % year on year while its producer price index (PPI) for manufactured goods declined 5.9%, government statistics showed.

China's trade data for the first six months were dismal, with volumes falling 23.5% from the same period last year.

Exports fell 21.8% to $521.5nb while exports declined 25.4% to $424.6bn in the first six months of 2009.

There would be a slight improvement in trade in the second half when demand from the US and Europe returns, economists said.

($1 = CNY6.83)

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By: Judith Wang
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