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Business confidence index pointer to recovery
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The Chinese economy, multilateral finance institutions and analysts are starting to say, is seeing signs of a rebound and may even touch the 8 percent growth target for the year, even as the business confidence index for the world's third biggest economy increased during the second quarter of the year.

The National Bureau of Statistics yesterday said China's business confidence index had jumped to 110.2 in the second quarter, from 101.1 in the first and an eight-year low of 94.6 during the final quarter of 2008.

The jump indicated that China's industrial, construction and real estate sectors were showing the highest confidence in business outlook, and State-owned enterprises were rebounding with higher momentum than small- and medium-sized companies.

"There is little doubt that China's economy is now embarking on an upward trend and this is more evidence that China had bottomed out in the first quarter," Zhuang Jian, senior economist with the Asian Development Bank, told China Daily.

As the world's other large economies would likely come out of recession by next year, growing external demand is expected to help boost China's growth further.

On Wednesday, billionaire investor George Soros said China could become "one of the motors of the world economy" on the back of the government's massive fiscal and monetary stimulus.

The International Monetary Fund on Wednesday upgraded its forecast for China's GDP growth this year and the next by 1 percentage point, to 7.5 percent and 8.5 percent, respectively.

The World Bank, the Organization for Economic Cooperation and Development and a clutch of other banks too have recently taken a rosier view of China's prospects.

Still, the recovery signals are not enough to drive away concerns.

China's Commerce Minister Chen Deming said on Wednesday that he was not sure if the domestic economy would pick up to a growth rate of more than 8 percent in the third quarter, as some economists have predicted. Despite signs of acceleration in the economy, Chen expressed concern about weak external demand, which he said would continue to hurt China's exports.

China has flagged potential problems that might hurt its still-fragile recovery, including risks from a surge in lending.

"If the bank lending was not used to revive the economy, but went into the stock and property markets, it would backfire by creating an asset-price bubble," the ADB's Zhuang said.

"As soon as China's consumer price index turns positive, the government should stop its lending spree," he said.

Zhuang also said that government spending was largely driving China's current recovery. "Without investments by a large number of small- and medium-sized companies, the recovery will not be solid and sustainable," he warned.

(China Daily July 10, 2009)

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