China is on the Way to Recovery

In the first quarter of 2009, China’s economy expended only 6.1%, the slowest pace in almost 10 years. Has the third largest economy in the world reached the bottom or is it just the beginning of prolonged slowdown?

At Trading Economics we think that China is on the way to recovery as the fast cooling in growth caused by a collapse in exports and private sector investment has been recently undertaken by aggressive government stimulus measures. The main evidence that the 4 trillion Yuan (US$585 billion) stimulus package is producing results has been a 30 percent surge in urban fixed-asset investment and a jump in industrial output in March. Moreover, banks, prompted by government orders, are extending loans; M2 money supply is growing at a record pace. Also, China plans to boost welfare spending by 29 percent and is giving 20 billion yuan in subsidies this year to help rural residents buy televisions, fridges and other electrical appliances. To make things even better, the world’s most populous nation is trying to rebalance the economy by improving welfare and health care to give Chinese the confidence to spend. The State Council issued in April an 850 billion yuan health-care plan, including building at least one hospital in every county and expanding medical insurance coverage to 90 percent of the 1.3 billion population by 2011.

Anna Fedec,
4/21/2009 12:19:19 PM