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July 17, 2009

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Home » Business » Economy

GDP growth signals recovery in wake of global fiscal crisis

CHINA'S gross domestic product expanded 7.9 percent year on year in the second quarter, lifting from the 17-year-low growth of 6.1 percent in the first three months.

It is a clear signal the world's third-largest economy is recovering from the effects of the global recession.

The growth rate was in line with market expectations and economists said China had become the first of major economies to ride out of the global recession.

Economists also believe the 6.1-percent growth figure was the bottom-out point.

However, the foundation for the rebound was not that solid and China's economy was still facing difficulties and challenges given the uncertainties in the global market, Li Xiaochao, spokesman for the National Bureau of Statistics, said in Beijing yesterday.

China would continue to carry out "a proactive fiscal policy and relatively easy monetary policy" to strengthen the growth, Li said during a televised press conference.

"China's economy is heading toward positive growth, while rising industrial production, domestic spending and improved people's livelihoods offset the slumps in foreign sales," Li said.

"China will continue to implement its stimulus package to counter the global financial crisis and keep policies stable."

China's improved economic growth in the second quarter helped to send the GDP in the first half to 13.98 trillion yuan (US$2.04 trillion), rising 7.1 percent from a year earlier.

The nation's agricultural industry grew 3.8 percent to 1.2 trillion yuan in the first half. The manufacturing sector and service sector expanded 6.6 percent and 8.3 percent respectively to 7 trillion yuan and 5.7 trillion yuan.

"China's economy continues to point to gradual stabilization and recovery," said Wang Qing, a Morgan Stanley economist. "As the green shoots in the economy have taken root, we expect it will blossom in the second half of this year."

China's industrial output advanced 7 percent in the first six months on an annual basis, with an accelerating pace in June when it gained 10.7 percent.

Urban fixed-asset investment jumped 33.5 percent from a year earlier through June, boosted by the country's 4-trillion-yuan stimulus package.

Retail sales grew 15 percent from a year earlier in the January-June period to 5.87 trillion yuan, up 3.7 percentage points compared with the growth rate in the same period of last year.

Rising industrial production, investment and people's increased spending in the domestic market countered the slowdown in trade, which decreased 23.5 percent year on year to US$946.1 billion through June.

"The Chinese authorities have delivered what they promised," said Sherman Chan, an economist at Moody's

Some economists believe it may be time for a neutral policy stance.

"With growth recovery clearly underway and bank lending rising dangerously fast, we think authorities may soon end the phase of 'shock-and-awe' type of stimulus packages," said Wang Tao, an economist at UBS AG.

"Given the persistent weak export and global outlook, however, we do not expect any immediate or abrupt shift in macro policy."


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