The question is whether the gain is, to a large extent, artificial.
China has put in place a stimulus package of well in excess of $500 billion. This money is probably driving up the economy quickly due to the power of the central government to disburse funds. That contrasts it with the US stimulus package which will probably take much longer to work its way through private enterprises and state and local governents.
Are the improvement in the China numbers a false indication of its economic recovery? Probably. There is still no evidence of recoveries in the economies of the US, Japan, UK, or EU. Although there have been some so-called “green sprouts”, none of them is a strong indication of rising import growth in the developed nations.
China may be having success in stimulating demand for goods within its own borders. It may also be building inventories of manufactured goods based on its hope that they can be shipped abroad in upcoming months. Economic data from China is too unreliable to allow analysts to determine if that is the case.
What is clear is that China has nowhere to send the yield of its sharp increase in production, which mean that it is not sustainable.
Douglas A. McIntyre
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