Thursday, July 16, 2009

China: economy grows 8%, prices fall 1.7%

Wow. Huh? Wow.

I didn't expect this. Talk about a stimulus package - vastly bigger than ours compared to the size of China's economy. China doesn't seem to have forgotten Keynes. Emphases mine.
BBC NEWS | Business | China grows faster amid worries

China's economy grew at an annual rate of 7.9% between April and June, up from 6.1% in the first quarter, thanks to the government's big stimulus package....

... Beijing now expects China to achieve 8% growth for 2009 as a whole, which compares with a predicted contraction of between 1% and 1.5% in the US.

... The BBC's correspondent in Shanghai, Chris Hogg, said China's latest economic growth was largely due to the government's 4 trillion yuan ($585bn, £390bn) economic stimulus plan unveiled last November.

... China's state controlled banks have lent huge amounts of money to the country's state owned and private sector businesses. Companies have used the cash to try to avoid shedding jobs and to invest in new equipment...

... The many new government infrastructure projects have provided employment for many of the migrant workers who have been laid off - mainly in the export sector....

... urban per capita incomes were up 11.2% from a year earlier, and that real rural per capita incomes were up 8.1%...

... Meanwhile, China's consumer price index fell 1.7% in June compared with the same month a year earlier, the fifth consecutive monthly decline....
Massive stimulus, surprising growth, income growth (and savings growth, presumably) and prices are still falling.

So if China's growing, and the US is "only" in a severe depression recession (sorry, typo), how do we explain world economic output falls? Does this explain why US inflation is relatively low? If China is growing like this, does the US really need a 2nd stimulus? (We are, after all, all connected.)

Our struggling journalists are not giving us a clear sense of how this story is unfolding.

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