Something to show off

April 23, 2009

Top Chinese officials were busy showing off warships and submarines to celebrate the 60-year anniversary of their navy today, but they have something to boast about when it comes to their economy too.  It is, after all,  the world’s third largest.

China’s economy grew 6.1 percent in the first quarter, lower than expected but still far outpacing its G20 peers, many of which are stuck in recession.

Goldman Sachs has just upgraded its forecast for China, expecting 8.3% growth in 2009 (up from 6%) and 10.9% (from 9%).

“The stimulus is clearly impacting growth more substantially so far this year, but domestic demand has also responded earlier and more forcefully than we originally expected,” the U.S. bank notes.

“We expect both dynamics to carry into next year, with policymakers signalling more clearly that they are likely to keep policy aggressively supportive for some time and we expect private investment to pick up from government spending as we head towards next year.”

The Russell Greater China Index, which includes equity markets in Taiwan, Hong Kong and China, shows a 12.3% month-to-date gain through April 21 with materials, health care, producer durables being the top performing sectors.

ING says China’s proactive stance on monetary and fiscal measures has resulted in a significant rebound in loan and money supply growth.

ING’s Greater China equity strategy fund returned 3.9% in the past three months, outpacing MSCI All-Country Golden Dragon Index which gained 2.95%.

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The recession is not only doom and gloom for the Chinese economy, even more companies will outsource their labor intensive production to cut operating costs. A large percentage of that outsourced production will end up in China, in this way boosting the Chinese economy.

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