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China?¢‚Ǩ‚Ñ¢s Recipe for Investment Success

The recent GDP figures released by China for Q2 2009 have brought a breath of fresh air to most of the global economy and raised the hopes of many that China will lead the world out of the recession. China's recipe for success is essentially based on investment - property but mainly infrastructure.

During this year's second quarter, the Asiatic giant grew by 7.9%, just fractionally short of the government target of 8% for the whole of 2009. Q2 figures are significantly higher than Q1 when China ‘only' registered 6.1% and as a result, many analysts were taken by surprise. However, the high growth in Q2 means that the government target is now seen as achievable. 8% annual growth is widely believed to the minimum level China needs to maintain in order to hold down unemployment.

The spokesman for the National Bureau of Statistics, Li Xiaochao, said that the figures were very positive. "Our economy is continuing to turn for the better and there are more and more positive factors," he said. Positive factors include rising industrial production and steady retail sales as China moves away from export-driven growth to domestic-driven growth. This economic model is also currently being seen in Brazil and India.

China's recipe for success is no secret. The main ingredient is massive - a giant government package to the tune of 4 trillion yuan (£356 billion). The package was introduced to stimulate the economy by large-scale investment in infrastructure. Further funding accompanying this unprecedented government spending has been provided by banks who have vastly increased their lending.

The results are plain to see and China is now well on track for its highly necessary 8% annual growth. On the back of the Q2 results, international experts recently upped their forecasts for China for this year. The IMF is now predicting 7.5% growth and the World Bank, 7.2%. However, Chinese official are reluctant to throw caution to the wind and emphasise that China is not out of the tunnel quite yet. According to Mr Xiaochao, there are still "uncertain and volatile factors" at work in the Chinese economy.

Nevertheless, the Q2 results are extremely encouraging and add weight to the generally accepted theory that three emerging economies (Brazil, India and China) are set to rebound both this and next year. The three giants are expected to lead the world out of its current recession.

Perhaps the most impressive aspect of China's GDP figures is that investment accounted for 6.2% of this year's total GDP growth of 7%. This proves that investment is vital to an economy. And since the recipe works, the Chinese government plans to maintain its investment package and Chinese banks also intend to keep up their lending levels.

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