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China's Economy Grows 7.9% In Q2

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BEIJING (AFP) - China's economy grew 7.9 percent in the second quarter of 2009, the government said, in a stunning turnaround for the Asian powerhouse that offered some hope for the rest of the world.

With help from 580 billion dollars in government pump priming, the world's third biggest economy picked up pace again after the global economic crisis dragged growth down to 6.1 percent in the first quarter.

Analysts said the rebound in China would offer a boost of confidence for the global economy as it struggles out of the worst economic crisis since the Great Depression of the 1930s.

"China is the first big country to have made a strong comeback, so its rebound will definitely offer a stabilising signal for the world economy," said He Jun, a Beijing-based analyst with the Anbound Consulting research group.

However, He and other analysts cautioned that immediate and direct benefits would be limited to countries that import heavily into China, chiefly resource-rich exporters and neighbouring nations in Asia.

To fight the downturn, the government began implementing a four-trillion-yuan (580-billion-dollar) stimulus package from November last year.

Li described the impact of the package as "remarkable", but he also warned pitfalls lay ahead amid concerns of bubbles in real estate and other key sectors."There are many difficulties and challenges existing in the current national economic performance. The base for recovery is still weak. The momentum for picking up is unstable," he said.

Economists also warned that China's rebound was unbalanced, with the export sector still struggling while massive bank lending had fuelled the potential for asset price bubbles and inflation.

"Although private sector investment has picked up, growth still relies heavily on the central government?s expansionary policies," said Lu Zhengwei, a Shanghai-based economist with the Industrial Bank (601166.SS - news) .

Nevertheless, Lu and other analysts said China's economy would likely grow by around 8.0 percent growth in 2009, in line with the government's target.

The figure is generally seen as the minimum growth needed to create enough jobs and prevent major social unrest in the nation of 1.3 billion people

China's exports dropped 21.4 percent year-on-year in June, the government said last week, the eighth straight monthly decline.

However, industrial output, which illustrates activity in the nation's millions of factories and workshops, expanded by 9.1 percent in the second quarter of 2009 from a year earlier, the bureau said.

In June, industrial output increased by 10.7 percent, and by 7.0 percent for the first half of 2009.

China's urban fixed asset investments, a measure of government spending on infrastructure, rose 33.6 percent in the first half of 2009 compared with the same period a year earlier, the statistics bureau said.

Investments in urban fixed assets increased by 35.3 percent in June year-on-year, according to the bureau.

And the consumer price index, the main gauge of inflation, fell 1.7 percent in June compared with the same month a year earlier, a further decline from May's drop of 1.4 percent, the bureau said.

Green bamboo shoots? (But we're not panda bears)

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Are they gaming their own people?

A massive construction boom, funded by government spending, together with huge increases in raw materials being purchased (even though no one is buying the finished products).

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Green bamboo shoots? (But we're not panda bears)

Some facts:

Size of US economy USD 14.3 tr

Size of Japanese economy USD 4.9 tr

Size of German economy USD 3.7 tr

Size of Chinese economy USD 4.4 tr

Size of Russia, India and Brazil economy combined USD 4.5 tr

Source: FT, actual money not purchasing power parity ;)

My conclusion, China (and the BRICS) can't drag the world out of recession when the US, Germany and Japan are in recession :(

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The growth is much like the high an addict gets when he shoots up another load of poppy extract. It works for awhile but soon wears off. Debt fuelled growth is perhaps worse than a natural period of contraction--it comes back to bite twice as hard.

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Are they gaming their own people?

A massive construction boom, funded by government spending, together with huge increases in raw materials being purchased (even though no one is buying the finished products).

To be fair to the Chinese they are spending some of 20 years worth of accumiliated foreign exchange reserves, not borrowing recklessly to stimulate their economy ;)

Unfortunately they only have USD 2tr of foreign exchange reserves so they can't keep it up for ever :unsure:

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duh! government buys stuff and makes things causes sales to rise.

lucky its not borrowed money.

shame the rest of the world still wont buy the stuff they make.....Germany, also a maker of things, suffer in a similar way to China.

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And the consumer price index, the main gauge of inflation, fell 1.7 percent in June compared with the same month a year earlier, a further decline from May's drop of 1.4 percent, the bureau said.

Shows they have a huge amount more room to stimulate too. They did this gigantic stimulus and still have the deflation.. which proves again the link between printing and inflation isn't so clear cut as many try to say. China could probably double this stimulus and not have inflation out of control.

Although if they hit their 8% gdp growth target they might just take the deflation.

Another thing about the Chinese stimulus is it happened so fast from the passage to shovels hitting the dirt. So millions are employed working. While other nations stimulus it seems there is environmental studies and public consultations and lawsuits to go through.. so maybe years before the stimulus creates jobs.

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Some facts:

Size of US economy USD 14.3 tr

Size of Japanese economy USD 4.9 tr

Size of German economy USD 3.7 tr

Size of Chinese economy USD 4.4 tr

Size of Russia, India and Brazil economy combined USD 4.5 tr

Source: FT, actual money not purchasing power parity ;)

My conclusion, China (and the BRICS) can't drag the world out of recession when the US, Germany and Japan are in recession :(

Thanks for that comparison, very interesting way to put them together to compare.

I agree that whil ethe Brics are getting quite large together, the world needs the mega spending from teh USA, Japan and EU to really pull out.

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Some facts:

Size of US economy USD 14.3 tr

Size of Japanese economy USD 4.9 tr

Size of German economy USD 3.7 tr

Size of Chinese economy USD 4.4 tr

Size of Russia, India and Brazil economy combined USD 4.5 tr

Source: FT, actual money not purchasing power parity ;)

My conclusion, China (and the BRICS) can't drag the world out of recession when the US, Germany and Japan are in recession :(

Good post.

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.. which proves again the link between printing and inflation isn't so clear cut as many try to say. China could probably double this stimulus and not have inflation out of control.

Even the Daily Reckoning is starting to doubt it's own thesis, and has even been drinking with Hugh Hendry.

We're still troubled by Hugh's comments. The inflation narrative is "too easy

to articulate," he says. Too many people see it coming.

"The market clearly is not worried about inflation right now," says colleague

Chris Mayer. "That is the only way to explain 10-year Treasury yields of

3.30% as of last Friday. The deflationist view is the one that prevails. This

view, which makes some compelling and elegant arguments, maintains that the

credit losses far surpass the monetary and fiscal stimulus. All those trillions in

destroyed debt, plus the yanking of credit from consumers and businesses,

overwhelm new money creation."

http://dailyreckoning.com/preparing-for-the-new-economy/

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Some facts:

Size of US economy USD 14.3 tr

Size of Japanese economy USD 4.9 tr

Size of German economy USD 3.7 tr

Size of Chinese economy USD 4.4 tr

Size of Russia, India and Brazil economy combined USD 4.5 tr

Source: FT, actual money not purchasing power parity ;)

My conclusion, China (and the BRICS) can't drag the world out of recession when the US, Germany and Japan are in recession :(

just a thought, not serious or anything, but if all these are the main economies, just wondering, kinda over a cup of joe, who are these guys selling all their stuff to?

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just a thought, not serious or anything, but if all these are the main economies, just wondering, kinda over a cup of joe, who are these guys selling all their stuff to?

Well I wondered that once and from what I've managed to glean:

The US actually imports a lot, but also exports a large but lesser amount of manufactures (however its internal economy is huge)

Japan, Germany and China are all net exporters of manufactured goods

Brazil exports raw materials, but imports manufactured goods

India is the one I don't know about :blink:

The total population of this lot is about 50% of the worlds population and probably 70-80% of its wealth :unsure:

Im afraid the answer is largely they sell it to americans and europeans :(

As an aside I once went to sub-saharan africa, one of the things that struck was how much less STUFF there was than any other place I'd been to :(

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As an aside I once went to sub-saharan africa, one of the things that struck was how much less STUFF there was than any other place I'd been to :(

With much of it our often still functioning cast-offs, from clothes to mobiles no?

Apology for you over on Beeny world BTW.

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I noticed that the Chinese GDP number essentially equates to 7.1% year-on-year growth in the first half of the year, but of this 6.2 percentage points came from investment, 3.8 percentage point from consumption and VERY WORRYINGLY negative 2.9 percentage point from net exports - so the recovery is not long term sustainable (they are essentially betting on things turning round globally (which i don't think they will in 2010).

Yes China will probably achieve near-8% economuc growth in 2009 - as it pumps massive waves of government cash into the economy - but I can't see this lasting if net exports remain net deductive in 2010. A serious double-dip awaits, we are in this recession for the long haul and any talk of green-shoots is massively premature in my opinion

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With much of it our often still functioning cast-offs, from clothes to mobiles no?

Apology for you over on Beeny world BTW.

Correct, ever wonder where all the old mobile phones go to die? ;)

(and no problem ;) )

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One man's loss is another's gain I suppose:

http://uk.biz.yahoo.com/16072009/323/euroz...eficit-ecb.html

Financial News

Thursday July 16, 10:23 AM

Eurozone shows 42.4-bln-euro payments deficit: ECB

FRANKFURT (AFP) - The eurozone's balance of payments posted a deficit of 42.4 billion euros (59.7 billion dollars) in the first quarter of 2009, when the economy shrank at the fastest pace ever, the European Central Bank said on Thursday.

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http://finance.yahoo.com/news/Chinas-econo...set=&ccode=

...../

The government warned, however, that a full-fledged recovery is not firmly established.

"The difficulties and challenges in the current economic development are still numerous," a statistics bureau spokesman, Li Xiaochao, said at a news conference. "The basis of the rebound of the people's economy is not stable."

The faster growth came despite a plunge in China's trade and foreign investment since late 2008, reflecting China's continued dependence on its 4 trillion yuan ($586 billion) stimulus to keep the economy expanding....../

Short term fix.

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I noticed that the Chinese GDP number essentially equates to 7.1% year-on-year growth in the first half of the year, but of this 6.2 percentage points came from investment, 3.8 percentage point from consumption and VERY WORRYINGLY negative 2.9 percentage point from net exports - so the recovery is not long term sustainable (they are essentially betting on things turning round globally (which i don't think they will in 2010).

Yes China will probably achieve near-8% economuc growth in 2009 - as it pumps massive waves of government cash into the economy - but I can't see this lasting if net exports remain net deductive in 2010. A serious double-dip awaits, we are in this recession for the long haul and any talk of green-shoots is massively premature in my opinion

If someone knows the balance between private sector consumption, exports and public spending in China its pretty easy to extrapolate how long they can fund it, without borrowing? ;)

I think (without knowing that key piece of data :unsure: ) they can fund into the short to medium term (2-3 years) without borrowing more and they do have useful things to spend it on in terms of social infrastructure (hospitals, schools, roads)

This is the benefit of savings the benefits of an economic boom :rolleyes:

So far China added USD 128bn onto its USD 2tr foreign exchange reserves in Q2 2009 according to the FT today, so their fire power for internal stimulus is holding up

Of course that is good for China, but the effect of them using up their foreign reserves (if and when) should force up borowing costs for the developed world where they have the money parked at the moment in government debt... :(

Add the fact that the UK exports mostly to Europe and little to China :(

So I would tend towards agreeing with your last comment, albeit froma different perspective ;)

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I noticed that the Chinese GDP number essentially equates to 7.1% year-on-year growth in the first half of the year, but of this 6.2 percentage points came from investment, snip

oh look, a rival for the City of London.

Goldmans have been busy.

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