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China shows signs of recovery

Although Chinas industrial production grew at a slower rate in April than a month earlier, the countrys economy is back on track for recovery, official data indicates.

Industrial production rose by 7.3% from a year earlier, compared with 8.3% growth in March.

Gareth Leather, an economist and industry chief (automotive) at the Economist Intelligence Unit, says the April figures indicate that growth is slowing. However, he says month-to-month figures are generally not sound, as the sector is very volatile.

China is recovering, he says. The final quarter of last year was very bad, growth came to a halt [but] started to pick up around February and March this year. He says the governments massive economic stimulus package has had a big impact on the economy and data shows that the Chinese economy is already recovering.

The government is targeting real GDP growth of 8% this year, but Leather says this target was quite ambitious and unlikely to be realised.

Though he says official statistics are not the most reliable data, the industrial production figures were important indicators since they reflect not only domestic development but also the outlook abroad.

China is one of the few big countries that will grow this year, even though growth will be slow.

Leather says that past growth rates, which peaked at 13% in 2007, were caused by a strong export sector and a housing boom. The economy will resume its yearly growth rate of 8% to 9% around 2011 or 2012, he says.

In the future, he says, the main driver for economic growth will be domestic demand. Investment, however, has often so far been linked to the export sector, exposing
Chinas economy to the slump in global demand.

Private consumption is weak and savings rates are high because of poor social security, Leather says. And with a better social system in place, people would start spending more.

In a lot of Asian countries, exports share of GDP is higher. In China, exports are not as important. He adds that the government has a big influence on the economy.

According to the National Bureau of Statistics of China, industrial production in the non-metal mineral products industry grew by 11.7%, while in the electric machinery and equipment manufacturing industry it grew by 11.1%.

Companies manufacturing transportation equipment increased their industrial output by 9.6%, and those in the chemical industry by 9.5%. Industrial production in the textile industry grew by 7.8% and the general equipment manufacturings production output increased by 7.1%.

Earlier this week, the government reported that Chinese producer and consumer prices had fallen in April.

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