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China targets early recovery with stimulus, consumer spending
(Xinhua)
Updated: 2009-02-03 17:15

Incomes, retail sales are silver lining

Ding and Tang described the Chinese economic picture as grim, but they also saw signs of optimism, because other major economic indicators such as retail sales, urban incomes and investment continued to grow strongly.

"It is good to have robust consumption, with retail sales growing markedly. Moreover, net income of urban residents didn't fall," said Tang.

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According to the NBS, retail sales jumped 21.6 percent last year to 10.8 trillion yuan, which was 4.8 percentage points higher than a year earlier. Urban disposable incomes averaged 15,781 yuan in 2008, up 14.5 percent year-on-year.

The NBS' Ma said real retail sales growth was 17.4 percent in December, or 0.8 percentage points more than in November.

He cited the December sales data as an indication of positive economic change. Other factors included acceleration in industrial output and a strong rebound in the money supply.

"Domestic sales growth remained relatively fast and consumption in urban and rural areas remained robust," he said, adding that strong consumption growth was expected to continue this year and help offset the impact of any export slowdown.

Another area of growth would be fixed-asset investment, which rose 25.5 percent to 17.23 trillion yuan in 2008. The growth rate was 0.7 percentage points higher than the previous year.

Yuan Gangming, a senior economist at the Underdeveloped Economic Center of the Chinese Academy of Social Sciences (CASS), a major government think tank, saw the 6.8-percent rate as a strong sign that the economy had touched bottom.

"Since many factories reduced production during the Lunar New Year holidays, economic growth in the first and second quarter this year is likely to bounce around the bottom, but we probably won't see uglier figures hereafter," he told Xinhua.

"Now that the monetary and fiscal policies have been turned to positive and a series of measures have been announced, an economic rebound is very likely," he said.

Quick turnaround

In September, the government made a macroeconomic U-turn as it shifted from fighting overheating to actively stimulating the economy. The central government announced a series of measures to spur investment and expand domestic demand. These included a 4-trillion-yuan stimulus package, a plan to expand rural ownership of home appliances and the issue of 3G telecoms licenses.

Additionally, the People's Bank of China (central bank) has cut interest rates five times since Sept. 15.

Unlike some emerging market economies, China is in a relatively strong position in terms of foreign debts. As of Sept. 30, outstanding foreign debt was about US$442 billion, up about 18 percent from the end of 2007. Short-term debt accounted for about two-thirds of the total. At end-September, foreign reserves totaled about US$1.9 trillion.

China's central government finances also provide it with some degree of flexibility: last year's budget deficit was about 111 billion yuan, but that was less than 1 percent of GDP.