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China's Economy Showing Signs of Recovery


New economic figures show that China's export-reliant 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, 23 percent less than exports last July.

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 percent from June.

Economist Stephen Green, with Standard Chartered Bank in Shanghai, says this is a sign of recovery.

"Exports are running about five percent month-on-month growth at the moment, and imports are running seven percent month-on-month growth, so this is suggesting simply that the economy is recovering, it's growing," Green said. "But because we contracted, particularly on the trade side at the end of last year, we're still not yet up to previous year's levels, and quite a long way down, 15 percent down at least in terms of the exports."

Other figures released Tuesday also show signs of economic recovery. Retail sales rose more than 15 percent 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 percent 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 percent.

Also, gross domestic product grew by 7.1 percent in the first half of 2009, falling short of the government's eight percent growth target for the year.

Green says the eight percent target is still within reach.

"In terms of the official GDP numbers we should see the economy somewhere around eight, nine percent this year," he said.

Green says most of the growth so far this year is coming from government stimulus spending. Late last year the government released a $580 billion stimulus package, most of which is being spent on urban infrastructure, such as roads and power plants. These investments rose 33 percent 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 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.

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