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China - Retail Sales and Industrial Production Up in May’09
Jun 30, 2009

May 2009 proved good for the retail sales and industrial production of China due to modest pace of deflation as well as government's stimulus plans.

According to the statistics, bank lending, industrial output as well as the retail sales surged in May 2009 with the heavy expenditure by the government on stimulus package in order to strengthen the Chinese economy, which is the world's third largest economy, amid plunging exports, reported Associated Press.

The reports from the National Bureau of Statistics reveal that retail sales in China increased 15.2% in May 2009 from May 2008. The growth was also higher from the 14.8% growth registered in April 2009. Moreover, there was 8.9% increase in industrial production, a good recovery from April's dull performance of 7.3%.

A modest rate of deflation boosted the pace of retail sales growth in May. The growth was a sort of reassurance to the policy-makers that consumers are complementing well with the government-led investments to combat the weak demand worldwide.

The government is making efforts to shield the country from the worldwide downturn with its plan worth 4 Trillion Yuan ($586 Billion) in order to infuse money into the country's economy by spending on public works such as building highways.

China is offering 7 Billion Yuan as subsidies on the purchase of cars and home appliances so as to substitute the older models. It is learnt that this program is an expansion of the scheme that was previously launched in rural regions. The revival in housing market is also propelling higher demand for household appliances.

The growth of industrial output of China also rebounded above expectation in May 2009 together with robust increase in credit as well as consumer spending. The result displayed by the industrial production in China verifies the effectiveness of the stimulus plans of the government. Though yet, the weak demand for Chinese products in the overseas markets means the growth of industrial production will be much below the higher rates registered in last few years.

Besides, in the last three months, the rate of destocking has been extremely fast in China, but now the destocking process has almost met its end.

According to a Research Analyst at RNCOS, "It seems as if the bad phase for the Chinese economy is over and the industrial output is back on track. Moreover, it is expected that the efforts of government to increase the money supply will further boost the industrial activities in China."

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