Signs of recovery in the Chinese economy, but the road is still long
Beijing (AsiaNews/Agencies) – The World Bank (WB) says the Chinese economy will grow by 7.2% in 2009, instead of the projected 6.5%. The recovery is attributed mainly to the massive government stimulus plan in favour of Chinese companies. But the Beijing State Council today declared that even if the mainland economy was showing more positive signs of a recovery it is at a critical juncture and it is necessary to step up measures to promote growth.
The Council stated, “the foundation of the economic recovery is not firm, and that there are many uncertainties as some regions, some sectors and some companies still faced difficulties”.
Official data released in the past week showed that factory output, retail sales, fixed-asset investment and bank lending all accelerated. Agricultural and industrial production grew but there was a sharper decline in exports and foreign direct investment.
The WB believes the unfolding surge in government-influenced investment was triggered by Beijing's 4 trillion Yuan stimulus package. Government-influenced investment rose 39% per cent in the first four months of 2009, up from an estimated +13% last year. But exports are sharply down, with the WB estimating only 9% annual growth rate over the next 10 years, after a decade of double digit growth.
This adds to their doubts that China can realise a rapid recovery. It also warns Beijing that “On current projections it is not necessary, and probably not appropriate, to add more traditional fiscal stimulus this year”.
Many have accused Beijing of channelling financial aid to domestic companies to the exclusion of foreign industry, in a protectionist move to render Chinese companies increasingly competitive. On May 26th last a news story appeared on the website of the Commission for the reform of national development revealing that over two thirds of the 4 trillion Yuan will be destined for Chinese industry. Yesterday the US chamber of commerce warned China against possible protectionism, both in China and the US, observing that the decision of how to use the financial aid should be influenced by social and economic concerns, not political ones.
In the current climate of crisis, Beijing has on many occasions issued safeguard measures for its domestic companies against foreign competition. In April the Ministry for Public Transport declared that the public transport sector would only use material made in China.
Jorge Wuttke, the head of the European Union Chamber of Commerce in China, has accused the authorities of privileging Chinese companies in the bidding procedures for a recent solar power contract. The main criteria of the bidding was the initial price, which favored Chinese companies, while the standard international practice is the total life of the facility.
But Beijing is very concerned about the tens of millions of migrants who have lost their jobs. June 15th Yin Wiemin, China's minister of human resources and social security, stated that government aims to create 22 million new jobs through the stimulus package.
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