Wednesday, October 21, 2009

Chinese GDP Set To Hit 8.9 Percent In 3Q

. Wednesday, October 21, 2009

By stockOzone team

The Chinese government figures show year on year GDP growth was up 8.9% from 7.9% in the previous quarter.

It is the fastest GDP growth since the third quarter last year.

Chinese officials have also said they are sure they will reach their full year target - of 8% - for economic growth.

The economy grew by 7.7% in the nine months to September.

The government has spent hundreds of billions of dollars on a massive package of infrastructure projects to create jobs and boost demand.

The effects of that stimulus are now evident in the real economy.

Right temperature?

Not too hot, not too cold is how some analysts describe China's current level of economic growth.

The momentum is likely to remain positive for the rest of this year and early into 2010, the experts say.

The new data shows that factory production is increasing too.

But factory owners say that in many cases, while the volume of goods they are producing has risen, the prices customers are prepared to pay for them are lower than before the financial crisis.

There are worries ahead.

Deflation has been a problem for eight months in a row now.

Unemployment is still high in many areas, and some factory workers are reported to be working shorter hours and earning less than they were before the financial crisis.

But the Chinese will take comfort from the fact that on the face of it their economy appears to be in much better shape than those of their rivals.

The next challenge for policy makers will be how to begin to withdraw elements of the stimulus plan, and to reduce the huge outflows of credit the country's state owned banks have issued, without damaging the economic recovery underway here.

As the stimulus is withdrawn, the hope is that demand from the private sector, from consumer spending and eventually from renewed demand for China's exports will pick up the slack and keep the country's growth rate stable.

The goal is to find ways to ensure this recovery is sustainable.

Disclosure: Author does not own any of the stocks discussed here.

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