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Domestic demand helps restore growth as exports fall

Latest update : 2009-05-12

China's effort to boost its domestic demand has shown signs of success. Investments by domestic companies in the first four months of 2009 were up 34.6%. Yet shipments continued to decline for the sixth month running, falling 22.6 % in April.

AFP - China's efforts to boost domestic demand to fight the global financial crisis showed strong signs of success Tuesday with investment in infrastructure rising as exports fell.

Shipments fell 22.6 percent in April from a year earlier in the sixth straight monthly decline, according to figures from the customs bureau.

But urban fixed asset investment, an indicator of the government's progress in lifting growth by funding infrastructure projects, was up 30.5 percent in the first four months of 2009, the National Bureau of Statistics said.

"This very obviously shows that domestic demand is quite good, maybe because of the fiscal stimulus package, and external demand is still too weak," said Xu Jian, a Beijing-based economist at China International Capital Cooperation.

Chinese authorities in November unveiled a four-trillion-yuan (580-billion-dollar) stimulus package to combat the financial crisis and to stimulate demand at home.

This came as China's massive export machine -- on which the nation's economy depends -- was battered late last year as the crisis hurt overseas demand.

The slowdown has led to the closure of thousands of exporting factories in the country's manufacturing heartlands, and, according to government data, at least 25 million migrant workers from poor rural areas are now unemployed.

Figures released by the statistics bureau also showed that funds for fixed asset spending in China came overwhelmingly from domestic sources this year.

Investments by domestic enterprises in the first four months of the year were up 34.6 percent, while investment by foreign businesses in the same period was down 1.2 percent, it said.

According to the customs data, China's exports in April rose 6.9 percent compared to March, and imports increased 15.1 percent.

Glenn Maguire, chief economist for the Asia Pacific region at Societe Generale, said this was consistent with the feature of an economy that was being driven by very strong fixed-asset investment growth.

"As China moves to an investment- and infrastructure-heavy growth model, what we are seeing is the economy is sucking in imports to meet that," he said.

Xu said that he expected exports to gradually improve towards the end of the year.

"But in the future, the government will definitely focus their policy more on consumption, as it knows its economy is imbalanced," he said, adding that this would take time.

Date created : 2009-05-12

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