Stock markets around the world jumped higher this week on news the Chinese economy rebounded during the second quarter to grow at 7.9% year on year up from 6.3% in the first 3 months of the year.
At first glance this is encouraging, however one must not forget prior to the global down turn Chinese GDP was running at an average of 11.3% over the period between Jan 2006 and June 2008.
Furthermore this rise in growth is due entirely to the massive 4 trillion Yuan (approx US$585 billion) government stimulus package and bank lending program.
There are some positive signs with consumer spending and industrial production rising. However, over the past decade exports have been the major driver of the Chinese economy, yet Chinese exports continue to decline as the global recession continues to cut into demand.
In short, I feel it is still too early to start singing the global recovery tune…
