China Economy: China’s Growth in Double Digits

China’s growth Heading Back to Double-Digits

Q3 results are in and China has done it again! China’s economic growth accelerated to a roaring 8.9 percent during the third quarter of this year compared to the same quarter last year. Clearly Beijing’s massive stimulus and lending program is yielding stunning results.
No major economy in the world (even in Asia) is performing anywhere near as well. China’s GDP totaled an astronomical $3.2 trillion in the first nine months of the year.

Some are saying that the results are slightly under expectations. Average growth over the first nine months of 2009 rose to 7.7 percent, disappointing those who had hoped for an flat 8 percent growth figure for the year to date.

Perspective please! China managed to drive this economic growth while the world was in a financial crisis. At the depth of the crisis, in the first three months of the year, China managed 6.1 percent growth. Every other industrial power was showing negative numbers. China continued to grow despite double-digit declines in exports.

The National Bureau of Statistics (NBS) now says China will be able to achieve the full-year growth target of 8 percent, which the government believes is essential to generate enough jobs. As we said in our most recent bulletin, some officials think nine percent is “no problem.”

Remarkably, this bullish growth in the economy has not generated inflation. NBS spokesman Li Xiaochao says the consumer price index (CPI), a main gauge of inflation, actually fell 1.1 percent year on year in the first nine months of the year.

The producer price index (PPI), a major measure of inflation at the wholesale level, dropped 6.5 percent year over year in the first three quarters. Industrial output rose 12.4 percent in the third quarter from a year ago, and was up 8.7 percent year on year in the first nine months.

As we have often said, growing China’s internal economy is key to surviving the recession and rebalancing world trade. That trend appears to be happening. Retail sales in the first nine months rose 15.1 percent year over year to $1.31 trillion.

In another sign of economic recovery, China’s imports last month stood at $103.01 billion. September imports fell 3.5 percent year over year, but rose an impressive 17 percent from August.

More important, exports are still down from last year but solidly trending upward. In September exports dropped 15.2 percent from the same month last year to $115.93 billion. But the value of September’s exports rose 11.8 percent from August.

This upward trend of recovery in foreign trade has been underway since March.

Economic acceleration may be just beginning for China. Much of the government stimulus money pumped into the economy last November won’t show up as economic growth until 2010. We are looking forward to the possibility of double-digit growth again next year!