Across China, steelmakers, cement producers, and construction companies are seeing sales soar as Beijing’s stimulus plan opens the spigot on funding for building. Building of all sorts: railways, airports, and power plants.The economic surge isn’t just about earth-moving.
The long slumbering property market is showing signs of a revival, with sales volume growing 29% in seven of China’s biggest cities including Beijing, Shanghai, and Chongqing in the first two months, says Jing Ulrich, managing director of China equities at JPMorgan Chase (JPM) in Hong Kong, though prices have not yet recovered.
On April 22, Goldman Sachs said it expects Chinese GDP growth to hit 8.3% this year, compared with an earlier forecast of 6%. Other banks have become more optimistic, too. Citing what she called ‘very strong stimulus-related bank-lending growth,’
In a speech on Apr. 18 Premier Wen Jiabao said the government deserved credit for the good news. ‘China’s rapid reaction in rolling out the stimulus package has resolved some prominent problems in the economy, strengthened market confidence, and stabilized people’s expectations,’ Wen said.
BusinessWeek points out that since the global recession is hammering China’s exports (they fell 20% in the first quarter of 2009), economists say the country must rely more on consumption to drive economic growth.
‘A short-term stimulus package is not the same thing as a long-term development strategy,’ cautions Fan Gang, director of the Beijing-based National Economic Research Institute China Reform Foundation.