Massive stimulus spending and record bank lending lifted China’s economic growth rate in the second quarter to 7.9%, a sign that the Chinese economy is defying the recessionary forces that are weighing down most other countries.
The surprisingly robust numbers released Thursday by China’s National Bureau of Statistics are an improvement from the 6.1% growth in gross domestic product in the first three months this year. And they suggest that China could reach the 8% growth rate this year that Beijing has deemed its benchmark for success.
“The increase confirms the significant impact that China’s economic stimulus program has had on domestic demand and indicates that the country is on course to achieve its growth target for the year,” said Jing Ulrich, managing director of China equities for JPMorgan Chase & Co. in Hong Kong.
China has issued tax rebates and lifted export duties to keep its export sector humming. It has used its $586-billion stimulus plan to spur infrastructure projects. And bank lending has resulted in $1.1 trillion in new credit, helping real estate investment rebound.
The aggressive policies were guided, in part, by fear of growing unemployment. China’s leadership has staked its credibility and system of government on its ability to deliver jobs and growing prosperity.
The unprecedented level of government loans has stoked fears of inflation and record levels of delinquent loans in the coming months, and policies governing the manufacturing sector have drawn concern.
The World Bank warned last month that China would have to focus on changing the fundamentals of its economy away from being export-driven to being more reliant on domestic consumption if it hopes to deflect the effects of collapsed global demand. The value of exports for the first six months of this year declined 21.8% from a year earlier.