MercoPress. South Atlantic News Agency

Chinese economy recovering on government stimulus spending

Industrial output and GDP were below economic forecasts

New economic figures show that China's export-geared economy still has weaknesses, but is showing signs of recovery. Still, there are warnings that much of the gain is dependent on government stimulus spending.

Chinese authorities said Tuesday that exports for July topped 105 billion USD, 23% less than exports last July while imports dropped 14.9%.

Li Xiaochao, spokesman for the National Bureau of Statistics, said at a Beijing briefing that “the grave international environment” affected Chinese exports. Yet while exports were down compared to last year, they increased more than 10% from June.

Other figures released Tuesday also show signs of economic recovery. Retail sales rose more than 15% this July compared with the same month last year. Beijing hopes domestic consumption will help make up for declining exports, and sees consumer spending as crucial to boosting the economy.

Industrial output also increased 10.8% in the year to July, the highest it has been in nine months.

But China missed some of its economic forecasts. The National Bureau of Statistics had expected industrial output to grow by nearly 12%.

Also, GDP grew by 7.1% in the first half of 2009, falling short of the government's 8% growth target for the year.

Separate data also showed Chinese consumer prices continued to fall in July. The consumer price index dropped 1.8% year-on-year, the National Bureau of Statistics said.

The drop was the sixth straight month of decline year-on-year. Wholesale prices were 8.2% lower year-on-year.

Analysts had expected the fall, since the year earlier period had significant inflation but concerns remain about continuing falls in prices.

Late last year the government released a 580 billion USD stimulus package, most of which is being spent on urban infrastructure, such as roads and power plants. These investments rose 33% in the first seven months of 2009 compared with the same period last year.

In keeping with the policy of investing in infrastructure to help create jobs, China said Tuesday it will invest almost 300 billion USD in railway construction over the next three years. By the end of this year, China's already extensive railway network would have over 50,000 miles of railway lines, second only to the United States.