China grows faster amid worries

China’s economy grew at an annual rate of 7.9% between April and June, up from 6.1% in the first quarter, thanks to the government’s big stimulus package.

The country’s quickening economic expansion comes as most nations in the West continue to experience recession.

Beijing now expects China to achieve 8% growth for 2009 as a whole, which compares with a predicted contraction of between 1% and 1.5% in the US.

However, the Chinese government warned that some economic challenges remain.

‘Numerous challenges’

The BBC’s correspondent in Shanghai, Chris Hogg, said China’s latest economic growth was largely due to the government’s 4 trillion yuan ($585bn, £390bn) economic stimulus plan unveiled last November.

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Yet Chinese officials said the increased economic expansion between April and June could not obscure continuing problems.

“The difficulties and challenges in the current economic development are still numerous,” said National Bureau of Statistics spokesman Li Xiaochao at a news conference.

“The basis of the rebound of the people’s economy is not stable,” he said.

“The base for recovery is still weak. Growth momentum is unstable. The recovery pattern is unbalanced and thus there are still uncertain and volatile factors in the recovery process,” the NBS said in a statement distributed ahead of a news conference.

It said that urban per capita incomes were up 11.2% from a year earlier, and that real rural per capita incomes were up 8.1%.

Meanwhile, China’s consumer price index fell 1.7% in June compared with the same month a year earlier, the fifth consecutive monthly decline.

Exports in June were down 21.4% compared with a year earlier, the government said last week.

Public private progress

Our correspondent said that while the public sector was leading the speed up in the rate of economic expansion, the private sector was also doing its part.

It’s by now clear that the fiscal stimulus package has offset the contraction in export activity
Daniel Soh, Forecast economist

China’s state controlled banks have lent huge amounts of money to the country’s state owned and private sector businesses.

Companies have used the cash to try to avoid shedding jobs and to invest in new equipment.

Meanwhile, the many new government infrastructure projects have provided employment for many of the migrant workers who have been laid off – mainly in the export sector, our correspondent added.

Analysts broadly welcomed China’s latest economic data.

“It’s very encouraging: the 8% growth target [for the year] is in sight,” said Daniel Soh, an economist at Forecast in Singapore.

“It’s by now clear that the fiscal stimulus package has offset the contraction in export activity.”

Industrial output – a measure of activity in the nation’s factories and workshops – grew by more than 10% year on year in June.

Urban fixed asset investment – a measure of government spending on infrastructure – rose by more than 35% over the same period.

China’s economic growth in the first quarter of 6.1%, had been the weakest growth since quarterly records began in 1992.

The country experienced double-digit growth from 2003 to 2007, and recorded 9% growth in 2008.

Source: BBC News

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