China’s ETFs Rebound, But Some Hurdles Remain

July 16th at 11:00am by Tom Lydon

Second-quarter GDP growth shows that China and its related exchange traded funds (ETFs) are among the front-runners in the race to emerge from a recessionary climate. How’d they do that?

The second-quarter reports from China show a GDP growth of 7.9%, exceeding the 7.8% ballpark figure from Bloomberg analysts. Bloomberg news reports that China has officially exceeded Japan as the globe’s second-largest stock market, measured in value.

The $585 billion stimulus package appears to be having a positive impact upon the economy, by encouraging lending and adding to share prices. The government now seems likely to achieve the full 8% full yer growth target set earlier this year, reports David Barboza for The New York Times.

Although the general sentiment is positive, there will still be a few challenges ahead to keep the growth on its path:

Uncertainty about the banks and worries that lending could result in wasteful spending, inflationary pressures and bad loans;

State-owned banks have played a major role in the recovery rather than government financing, and exports aren’t a role in the recovery;

Weak electricity consumption numbers and a drop-off in foreign investment shows growth may not be as strong as official data reported;

Nonetheless, the signs of strength outweigh the weakness, and the recovery in the country is remarkable, considering that most China ETFs were down about 50% in 2008.