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.
- SPDR S&P China (GXC): up 38.9% year-to-date
- PowerShares Golden Dragon Halter USX China (PGJ): up 41.5% year-to-date
- iShares FTSE/Xinhua China 25 Index (FXI): up 35.3% year-to-date
For more stories about China, visit our China category.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.