June 17, 2009
Beijing’s stimulus spending plan is boosting economic growth
China’s investment surged in May as the government poured money into its economic stimulus, helping to offset an unexpectedly sharp drop in trade, and economists said the world’s third-largest economy was improving.
Spending on factories and other fixed assets soared 32.9 per cent in the first five months of the year, the National Bureau of Statistics said. Merrill Lynch said that translated into growth in May of up to 38 per cent.
“Domestic activity has picked up, thanks to the government stimulus spending,” said economist David Cohen of Action Economics in Singapore.
May exports fell by a record 26.4 per cent from the same month of 2008, while imports contracted by 25.2 per cent, the customs agency said. That exceeded most economists’ forecasts.
Exports will not recover until key U.S. and European markets rebound, said economist Zuo Xiaolei of Galaxy Securities in Beijing. She said weak global demand for China’s goods will hurt its appetite for imports, a big share of which are raw materials and components used by export industries.
“For a fundamental improvement, we have to look to the international market,” Zuo said.
Despite the fall in imports, analysts said China’s demand for oil, iron ore and other foreign raw materials is rising as Beijing pumps money into the economy through its four-trillion-yuan (US$586 billion) stimulus.
“The Chinese economy for sure is improving. We have seen the bottom of the cycle,” said Credit Suisse economist Dong Tao.
Other indicators also show the economy is recovering.
Home sales surged 45.3 per cent in the first five months of the year from the same period of 2008.
Auto sales are up sharply, driven by cuts in sales taxes and other government incentives.
The contraction in imports was driven in part by a 30 to 50 per cent fall in prices of iron ore, oil and other commodities from last year’s highs, economists said. They said that meant the value of imports fell even as volume rose.
Beijing’s stimulus is based on heavy spending on construction of airports, highways and other public works. Most of the money has gone to state-owned construction companies, but it is spreading to the private sector as builders hire workers.
The spending also has fuelled a rise in imports of iron ore for steel and other building materials.
|MOST POPULAR STORIES|
|TODAY’S TOP CONSTRUCTION PROJECTS|
These projects have been selected from 371 projects with a total value of $1,936,826,394 that Reed Construction Data Building Reports reported on Thursday.
$134,000,000 Toronto ON Prebid
$128,250,000 North York ON Prebid
$100,000,000 Toronto ON Prebid
- VIDEO: Debate still strong as OCOT turns one
- Upset waters over new Ontario diving regulations
- Covering up the Celsius
- Frontier Oilsands Mine joint review panel raises concerns among some First Nations
- Doors open on latest PPP Canada funding
- U.S. builders’ confidence rises but is limited by tight credit and shortages of labour and lots
- Keystone XL opponents carve message
- RFP released to shortlisted teams for Milton hospital expansion
- Photo Gallery: 2014 ACEC BC Awards of Excellence winners
- Journal of Commerce Preview for the week of April 21st, 2014
- Fort McMurray airport terminal getting ready for take off
- B.C. government forms liquefied natural gas working group
- Kitimat residents vote against Northern Gateway pipeline
- Precast concrete enables net-zero homes
- Learning to dig safely can save lives
- Ex construction boss admits to collusion in government contracts
- P3 Fund launches
- Supreme court won't hear case involving construction mogul
- Minister spurns spat over plant