China Economy: News & Discussion

badguy2000

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No way you can cool down now mate. This will lead to the rise of India which is waiting to take your position. The Chinese economy is like the "hare" in the race between the Hare and the Tortoise. The hare cant afford to sleep and wake up at the time it wants to.
you are clueless about the reality.

during the second quarter,china's economy grow about 8% and is expected to grow 9% easily this year,due to the heavy stimulus.

such a growth may cause inflation and overheat of economy and it worrys lot of people including me.

I do think the prime task of Chinese government should be wary of overheat of economy ,instead of depress, now.


India is another case.


India now still should struggle to avoid depress.
 
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SammyCheung

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China is growing too fast. India is drowning in debt. It's going to get downgraded soon. The whole Indian economy is based on government spending to please poor tribes here and poor tribe there.
 

thakur_ritesh

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that indeed is a very smart recovery and i am pleasantly surprised, but then by now i should have been accustomed to prc keep doing that on regular occasions in various fields, good on them and this does show the stimulus package going into the economy has started bearing results, and if the trends continues i am sure not far from now prc would have gotten back to their double digit growth rate ways.

in all this jubilation a few of the articles that i have read above do not quite argue well about the way the things are being run especially with the stimulus package ending up in the real estate and where the banks run a huge risk of seeing these loans end up as bad debts in the long run which also has a bad history to it in prc. all one can hope for is no such thing happens and things move on smoothly because if few of the prc banks were to go down now, well the timing would be disaster for the global economy as a whole.

that said it is completely astonishing how prc keeps pulling it off and mind you all this with the back drop of prc as big time export based economy where consumption as a % of economy does not account for more than 30% but consumption along with investment rate and government spending have been instrumental in pulling this off, but what is the state of affairs of fiscal deficit for the prc or at the moment they are not too bothered about it, as also the push to the inflation rate does not come as a surprise as is being mentioned by our chinese friends, is this a recipe for disaster.

i am not too confident of this growth but prc has shown that they can live with such overheating in the past, so lets see how things go this time round and if they do not have much bad debts by the end of it then i am sure prc would most certainly be flying high again.

Sammy,

yes, sadly with india even being a democratic country and supposedly more tiled towards capitalism still finds its government making 40% of the total investment that happens in india. that rate just shows how much of government we still have to encounter in our day-to-day lives, but then that roots from the fact that india isnt quite as well reformed unlike others as also india is still having strong roots in the policy of socialism.

mind you this investment rate of the government in 1980 was at 38% so seriously there has been no change but then what is important is has the over all quality of investment changed and the answer is a sure shot yes because this money has gone a long way in helping out the down trodden of the society with its mass appeal where it is further helpful in creating semi skilled labor force which would be of great use as the industrialization of the country picks up as also this is a way of making sure there is a system of social security for the mass.

i am not concerned with the above mentioned figures but more about the corruption that we face, if we can successfully work that out, india would be galloping to a prospective tomorrow where the speed at which poverty is rooted out would be astonishing. think and reflect on this statement where rajiv gandhi in the late 80s said, of evey rupee invested only 15paisa actually gets invested, now if this same 15p can be turned to 60p, world would be stunned of how fast india is able to bring about the change.
 

badguy2000

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the stimulus package is too harsh.

it may cause infaltion and other negative effects,while it has brought china out of depression.

Once oversea demand is to resume, the peril of infaltion will be more clear.

it is the hign time to take measues to cool down the economy.
 

thakur_ritesh

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badguy,

what according to you should be these containing measures as in what all sectors need to targeted and how, as also what is status of rains in prc, are you people also expecting food related inflation in the coming months?
 

badguy2000

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badguy,

what according to you should be these containing measures as in what all sectors need to targeted and how, as also what is status of rains in prc, are you people also expecting food related inflation in the coming months?
the price of real asset is rising fast now. I have posted one thread about my buying an condo.
Beijing should take measue to stop the liquid flooded by banks . too much bankl loans are flooding the country.
 

Ray

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China's economy is out of control

China is growing so fast -- using cheap money to build steel mills, highways and textile factories it doesn't need – that the coming crash grows uglier by the day.

By Jim Jubak

In a train wreck, there comes the moment when it's no longer possible to avert disaster. Pull the brakes as hard as you can, the momentum of the train is so great that disaster is unavoidable.

I fear that China's economy passed that point of no return in the second quarter of 2006.

Today, I'm going to tell you why I think China's economy is headed for a train wreck. Not tomorrow, but in the reasonably near future. I'd say 2009.

And in my next column, I'll sketch out the likely effects of that train wreck on the rest of the global economy and the folks, like you and me, who invest in it.

If you've been following the debate in the U.S. about the likelihood that cheap money here has produced a bubble in housing prices, you're already familiar with the basic scenario for a train wreck in China. Cheap money makes it easy to borrow to buy assets. That produces an asset bubble -- in the United States, first in stocks and then in real estate. As the asset bubble grows, borrowers get in over their heads as their judgment is overwhelmed by the excitement of rising prices. And lenders under the influence of similar emotions make loans to unqualified borrowers.

When the asset bubble starts to deflate, overextended borrowers default on their loans, putting pressure on lenders, who respond by tightening their lending standards, reducing the amount of money available to all borrowers. That sends the economy into a slowdown or worse.
They're borrowing to grow even more
China does add a few wrinkles of its own to that scenario. Since the Chinese economy is still very bad at allocating capital, corporate borrowing to build new plants itself becomes part of the asset bubble. I'll start my sketch of China's coming train wreck with the problems in that sector.

In the second quarter, China's gross domestic product grew by an extraordinary 11.3%. That's a significant speed-up from 9.9% growth in 2005, 10.1% growth in 2004 and 10% growth in 2003.

That's a problem, because an economy can have too much growth. In China, it has led to massive overinvestment in manufacturing assets in sectors already suffering from oversupply. Investment in fixed assets -- everything from steel mills to cement plants to oil refineries to highways -- grew by 30% in the first half of 2006.

Although the reported profits of China's largest industrial enterprises climbed 28% in the first half of 2006 over the same period in 2005, companies in some sectors have seen profits squeezed, sometimes to the vanishing point. According to government numbers, 80% of the profits in the Chinese economy went to companies in the oil, power, coal and nonferrous metals sectors. The other 30 sectors of the economy shared just 20% of corporate profits.

The iron and steel sector is the current poster child for the problem -- and a worrying sign of things to come in other sectors. Profits in the sector dropped by 20% in the first half of the year. The problem is overcapacity. Too many steel companies have added too much capacity, driving down the price they can charge for their product.

That's not exactly a surprise to the government in Beijing. At the end of 2005, steel production capacity stood at 470 million metric tons. (A metric ton is about 2,200 pounds.) Concerned about the issue, China's National Development and Reform Commission announced a plan to remove 100 million tons of steel capacity from the market by 2007 by gradually phasing out small blast furnaces and converters. Removing that production capacity from the market would be key to restoring profitability to the sector.

That was the plan. Instead, steel companies have broken ground on 70 million tons of new capacity and put an additional 80 million tons into the construction pipeline. Thanks to opposition from local authorities, the National Development and Reform Commission said it would be able to close just 55 million tons of capacity by 2007, and that it was pushing back its deadline for the full 100 tons to 2010.

If the iron and steel sector is unprofitable, why are companies rushing to build new capacity? Three reasons:

* First, by adding new, modern capacity, smaller and less-efficient producers can avoid the government regulations that would force them to shut.

* Second, local officials have big incentives to keep mills open, even if they're losing money: Officials are judged on metrics such as local job growth, and they often have a financial stake in local companies.

* Third, money is cheap in China. How cheap? The People's Bank of China recently raised its benchmark one-year rate to just under 6%. But with inflation at the wholesale level running at about 2.4%, that leaves the real cost of a one-year loan at about 3.5%.

Cheap money will find an outlet
There's lots and lots of money to go around, too. Despite efforts to rein them in, China's banks made loans equal to 87% of the annual loan target set by the central bank in just the first six months of this year. The People's Bank of China had planned to keep money supply (M2) growth to 16% for all of 2006. But by the end of June, money supply was up 18.4% year over year.

The problem here is that to keep the Chinese yuan from appreciating against the U.S. dollar, the bank has to buy U.S. dollars and sell yuan to offset the huge inflows of U.S. dollars from China's trade surplus with the United States. Thanks to that buying of dollars for yuan, the yuan has appreciated just 1.4% against the dollar since it was revalued (by just 2.1%) in July 2005.

As we in the United States know, too much cheap money in circulation produces asset bubbles. In the United States, the results were the stock bubble that broke in 2000 and the real estate boom that is slowly (we hope it's slowly) deflating now.

Cheap money in plentiful supply has produced a real estate boom in China, too. Housing prices in Shenzhen, an industrial city near Hong Kong, were up 14.6% over June 2005. In Beijing, the increase was 11.2%. In 70 large and medium-size cities in China, the prices of what the National Bureau of Statistics defines as "expensive" housing climbed 9.7%.

Higher prices pull more money into real estate, of course. In the first six months of 2006, real estate investment climbed 24.2% over the same period in 2005. According to the National Bureau of Statistics, 1.41 billion square meters of housing were built from January through June 2006, up 21% from 2006. And as the boom ages, prices soar and excesses multiply. Units in the Tomson Riviera luxury apartment complex in Shanghai, for example, are priced at as much as $20 million. (I love the complex's slogan: "dedicated to the elites." How things have changed in Communist China.)

The Chinese government, alarmed by runaway real estate prices because high housing prices have become a major political flashpoint for the majority of urban Chinese, has attempted to pour cold water on the real estate boom by issuing new regulations that raised taxes on real estate speculation.
Incentives to spend, not save
But the problem with an economy fueled by cheap money is that if you damp an asset bubble in one sector, the money will just create an asset bubble somewhere else. So, for example, wealthy Chinese -- and the country had 320,000 (U.S. dollar) millionaires in 2005, up 7% from 2004, according to Merrill Lynch -- worried about high taxes on real estate speculation have moved their speculation to the art market. China's 4,000 auction houses sold 10 billion yuan of art last year, up from 800 million yuan in 2000, according to the China Association of Auctioneers. Sales at the autumn and spring auctions of contemporary Chinese art in Hong Kong more than doubled in 2005 from 2004, according to Christie's International and Sotheby's.

The government seems extremely reluctant to tackle the root causes of these bubbles. Despite the People's Bank of China's April increase in the benchmark one-year interest rates to 5.85% -- the first rate increase in 18 months -- interest rates for borrowing are still ridiculously low. Companies can borrow at an after-inflation rate of about 3.5%.

On the other hand, the People's Bank left the one-year interest rate that depositors get paid at 2.25%. That worked to bolster the profits of the big Chinese banks that the government is interested in taking public with Western investors as major buyers. It also created a massive disincentive for companies to save their cash. Instead, companies are reinvesting their cash, adding to the growth of fixed assets and to capacity gluts in some industries. According to the World Bank, retained corporate earnings accounted for more than half of new investment last year. That's about double the ratio in the United States.

Such corporate reinvestment has completely negated government efforts to shift more of China's national economy from investment and exports to buying by consumers. In 2005, the investment and export share of the economy actually increased and the consumer share fell to an all-time low of just 38% of GDP, according to the Institute for International Economics. And this corporate investment in fixed assets is largely unaffected by any changes in banking regulations or bank interest rates.

An increase in the value of the yuan against the dollar would damp corporate profits, slow the speed of investment in fixed assets and reduce speculative inflows from overseas investors who anticipate a yuan appreciation. Hiking the one-year benchmark interest rate again and again, and raising the interest rates paid to depositors would have similar effects. But such actions would also slow the economy and reduce the number of jobs that the economy is creating. China needs GDP growth north of 7% a year just to stay even with the number of new job seekers thrown up by its massive population every year. Reducing unemployment and underemployment -- categories that take in about 40% of the Chinese population by some counts -- requires even faster growth.

A significant portion of China's small ruling inner circle has fought efforts to attack the problem at the source to a standstill. Commerce Minister Bo Xilai, for example, has complained that any appreciation in the yuan will cripple profits in marginal industries such as textiles, where the profit margin is just 3%. A purely rational economic analysis would say that if Chinese textile makers can't compete after the yuan is appropriately revalued, then the least-efficient companies in the sector should go out of business and the jobs should flow to countries, perhaps Vietnam, where lower labor costs would allow textile makers to make a profit.

That would mean shipping jobs out of China, however, and advocating that is political death in a country that needs to create 20 million jobs a year to keep the population governable by the Communist regime.

So China is rolling the dice. Cheap money creates jobs today. Tomorrow? Well, maybe somehow things will work out.

In my next column: What happens to China -- and us -- if things don't somehow work out.

E-mail Jim Jubak at [email protected].

China's economy is out of control - MSN Money
What do you make of it?

Is China up a gum tree?
 
S

SammyCheung

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LOL. China's GDP grows at nearly 9% per year. America is in a depression, possibly facing hyperinflation.

Guess who's on top in this fight?
 

Ray

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Oh goody!

Here is something to cheer one about!

ADB lowers China's 2009 economic growth forecast
English_Xinhua 2009-03-31 10:10:05

BEIJING, March 31 (Xinhua) -- The Asian Development Bank (ADB) forecast in a report Tuesday morning that economic growth in China would slow to 7 percent in 2009 as a result of world economic downturn.

ADB's flagship annual economic publication, Asian Development Outlook 2009, said China's economic growth rate would drop to 6 percent in the first quarter from 6.8 percent in the fourth quarter last year.

This report came after a previous forecast published by the World Bank (WB) in mid-March, which said China's economy would expand 6.5 percent in 2009.

ADB lowers China's 2009 economic growth forecast_English_Xinhua
 

Ray

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LOL. China's GDP grows at nearly 9% per year. America is in a depression, possibly facing hyperinflation.
The Chinese news does not agree with you (as posted above).

But then, you must be right and the newspaper, which gets it info from the CCP, is wrong!

Hyperinflation acceptable, but what about hyperventilation?
 

badguy2000

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The Chinese news does not agree with you (as posted above).

But then, you must be right and the newspaper, which gets it info from the CCP, is wrong!

Hyperinflation acceptable, but what about hyperventilation?
I can feel people here worry about the rise of real asset price.

it should be the first time that people have thought so since in early 2008 Beijing decided to cool economy.

too many bank loans have been poured into the economy,which is stimulating bubbles.


if Beijing keep it on, Chinese economy will ride on a crazy hourse ,just as it did before 2008.
 

Daredevil

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I can feel people here worry about the rise of real asset price.

it should be the first time that people have thought so since in early 2008 Beijing decided to cool economy.

too many bank loans have been poured into the economy,which is stimulating bubbles.


if Beijing keep it on, Chinese economy will ride on a crazy hourse ,just as it did before 2008.
Experts are saying that China is having twin bubbles, one the asset (share market) bubble and the other real estate bubble. It might be devastating if CCP lets this to continue.
 

1.44

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China's stunning rebound
July 16, 2009

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

With help from $580 billion 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.

"The economy is rebounding and the strength of the recovery is increasing," National Bureau Spokesman Li Xiaochao said at a media briefing to release the data.

China's gross domestic product grew by 7.1 percent in the first half of 2009 compared with the same period a year earlier, according to the bureau.

This put China back on track to achieve its goal of 8.0 percent growth for the year, despite the financial crisis hitting its crucial export sector particularly hard.

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.

Before the global economic crisis struck, China experienced double-digit annual growth from 2003 to 2007, and again for the first two quarters of last year.

To fight the downturn, the government began implementing a four-trillion-yuan ($580-billion) 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.

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. - Sapa-AFP
 

badguy2000

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Experts are saying that China is having twin bubbles, one the asset (share market) bubble and the other real estate bubble. It might be devastating if CCP lets this to continue.
most of the two bubbles had bee squeezed by chinese givernment before august ,2008. but after the finacial crisis bring china into the edge of depression, Chinese government had to loose the condition of loans and cause the flood of loan in china.


so, now the two bubbles seems to rebound.
 

shotgunner

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The Chinese news does not agree with you (as posted above).

But then, you must be right and the newspaper, which gets it info from the CCP, is wrong!

Hyperinflation acceptable, but what about hyperventilation?
I used to think hyperinflation reduces purchasing power hence lowers living standard, why you say it is acceptable?

What is hyperventilation?
 

Rage

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China's Beijing Auto says fails in bid for GM's Opel

Fri Jul 24, 2009 9:14am EDT


A traffic sign shows the way to the Opel plant in Ruesselsheim July 14, 2009.


BEIJING (Reuters) - China's Beijing Auto said intellectual property issues were behind its failure to reach an deal with General Motors over its Opel unit.

General Motors' European business said on Thursday it had agreed to continue detailed talks with both Magna and RHJ International on its German unit Opel, but did not mention Beijing Auto, which had also submitted an offer.

"In the negotiations over intellectual property, we have been in constant communications with U.S.' General Motors," the company said in an e-mailed statement on Friday.

"Regrettably, both parties failed to reach agreement on (the intellectual property) issue," said the company, quoting an unnamed spokesperson.

Beijing Auto did not mention in the statement what are the next possible steps after the end of its Opel bid.

But sources told Reuters this week that the Beijing city government will fully support a bid by the company for Ford Motor's Volvo car unit if Beijing Auto failed in its quest Opel.

Beijing Auto, controlled by the Beijing government, aims to more than double its annual vehicle sales to 2 million units by the end of 2015 from merely 771,639 units in 2008.

But the automaker, ranked fifth in China, does not even have its own car brand. Its four-year old Mercedes-Benz car venture with Daimler AG broke even last year and its tie-up with Hyundai Motor Co has a long way to go before catching up with top players in the market such as Volkswagen AG.

Beijing Auto did not give details on what products or technology the intellectual property issues were about.

In its bid to General Motors, Beijing Auto had pledged to maintain GM's stake in Opel to the largest extent, to ensure Opel's market share in Europe stable and to support Opel's expansion into the Chinese market, the statement said.


http://www.reuters.com/article/newsOne/idUSTRE56N16N20090724
 

hit&run

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China's stunning rebound
July 16, 2009
Chinese GDP a case of 'fake it ‘til you make it'

China’s GDP figures might show that the world’s third-largest economy is coming out of its funk. But few economists will take Thursday’s report at face value. While their caution is wise, the Middle Kingdom probably is recovering – tentatively.

By John Foley, breakingviews.com
Published: 3:16PM BST 15 Jul 2009

The country’s leadership has set a target of 8pc growth for 2009. Most economists believe the magic number will be hit, as do 88pc of investors in China, according to an ING survey. Reported growth in the first quarter was 6.1pc, and a 7.1pc “print” is expected for the second quarter, followed by above-trend growth in the second half.

But the GDP growth rate in China is too important a number politically to be reliable. From the bottom to the top of the data chain, everyone has a reason to report numbers that look politically correct. As economist Charles Goodhart pointed out, when leaders turn a measurement into a target, it stops being a good measurement.

Still, simpler indicators also point to recovery. Car sales rose 37pc in June. Electricity consumption rose 3.7pc, reversing May’s decline. Production of steel, diesel, speciality chemicals and even fridges are all back at pre-downturn levels. Exports are still falling, but a slower fall in imports suggests China's domestic consumption is recovering faster than that of its trade partners.

None of these indicators is perfect. Sales can rise because prices are cut to unsustainably low levels. Industrial production counts what's made, not what's sold. And rising imports could be a sign of firms buying materials to make products that as yet have no buyers.

Either way, financial aid has certainly helped make this recovery, if there is one, look healthier. The central bank has pumped three times more money into the economy so far this year than in the same period last year. A record rise in the country’s foreign exchange holdings in June suggests speculative foreign money is now adding to the wall of liquidity.

Whatever the GDP figures show, China remains an unbalanced economy. Real private consumption is immature. Only time can change that. The export engine remains dormant. Only a recovery in the US and Europe can get it moving. Over those things, Beijing has next to no control.

Chinese GDP a case of 'fake it ‘til you make it' - Telegraph
 

badguy2000

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Chinese GDP a case of 'fake it ‘til you make it'

China’s GDP figures might show that the world’s third-largest economy is coming out of its funk. But few economists will take Thursday’s report at face value. While their caution is wise, the Middle Kingdom probably is recovering – tentatively.

By John Foley, breakingviews.com
Published: 3:16PM BST 15 Jul 2009

The country’s leadership has set a target of 8pc growth for 2009. Most economists believe the magic number will be hit, as do 88pc of investors in China, according to an ING survey. Reported growth in the first quarter was 6.1pc, and a 7.1pc “print” is expected for the second quarter, followed by above-trend growth in the second half.

But the GDP growth rate in China is too important a number politically to be reliable. From the bottom to the top of the data chain, everyone has a reason to report numbers that look politically correct. As economist Charles Goodhart pointed out, when leaders turn a measurement into a target, it stops being a good measurement.

Still, simpler indicators also point to recovery. Car sales rose 37pc in June. Electricity consumption rose 3.7pc, reversing May’s decline. Production of steel, diesel, speciality chemicals and even fridges are all back at pre-downturn levels. Exports are still falling, but a slower fall in imports suggests China's domestic consumption is recovering faster than that of its trade partners.

None of these indicators is perfect. Sales can rise because prices are cut to unsustainably low levels. Industrial production counts what's made, not what's sold. And rising imports could be a sign of firms buying materials to make products that as yet have no buyers.

Either way, financial aid has certainly helped make this recovery, if there is one, look healthier. The central bank has pumped three times more money into the economy so far this year than in the same period last year. A record rise in the country’s foreign exchange holdings in June suggests speculative foreign money is now adding to the wall of liquidity.

Whatever the GDP figures show, China remains an unbalanced economy. Real private consumption is immature. Only time can change that. The export engine remains dormant. Only a recovery in the US and Europe can get it moving. Over those things, Beijing has next to no control.

Chinese GDP a case of 'fake it ‘til you make it' - Telegraph
yes, west medias and lots of chinese medias always insist that China's GDP be "fake".
 

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