China growth underlines rapid rebound

Financial Times

China’s recovery accelerated in the third quarter as a result of the government’s massive lending programme with the economy growing at 8.9 per cent compared with the same period last year.

 

The National Statistics Bureau on Thursday said that the increase in investment and retail sales had also accelerated in September, underlining the rapid rebound in the economy that has taken place in recent months.

 

The expansion in the third quarter compared with year-on-year growth of 7.9 per cent in the second quarter and 6.1 per cent in the first quarter, when the country’s export sector was hit hard by the global crisis. In the first nine months, the economy expanded 7.7 per cent, much faster than any other major economy.

Li Xiaochao, spokesman for the NBS, said the economy was at a “crucial stage”. “The basis of the economic recovery still needs to be consolidated, and the insufficient external demand is still severe,” he said.

The sharp rebound in the economy has prompted calls for the government to begin withdrawing some of the stimulus it has injected, including a massive increase in bank loans. Qin Xiao, chairman of China Merchants Bank, said in an article in Thursday’s Financial Times that China needed an “urgent” tightening monetary policy to prevent bubbles in stock and property prices.

The State Council indicated a shift in strategy on Wednesday when it said that China’s policy should focus both on controlling inflationary expectations and securing stable growth, the first time it had mentioned inflation since the crisis began. The statement has prompted speculation that the government could begin to restrict credit to banks or appreciate the currency in order to limit inflationary pressures.

 

Posted via email from Jim Nichols