Construction workers labor at the top of a building in Shanghai, China. China’s economy charged ahead in the third quarter, expanding by 8.9 percent thanks to lavish stimulus spending that sparked a boom in construction.AP photo
SHANGHAI — Lavish government spending and bank lending helped China’s growth rate accelerate to an 8.9 percent pace in the third quarter, far outstripping expansions elsewhere around the globe and raising questions about whether the rapid rebound can be sustained.
China also announced Thursday that industrial production and investment spending are growing at a faster pace. That seemingly good news unsettled local stock investors, however, on fears Beijing may need to rein in its stimulus policies to avoid asset bubbles and inflation.
Companies, central bankers and political leaders around the world are increasingly counting on growing demand from Chinese producers and consumers to offset sluggish home markets. Corporations from Coke to Caterpillar are seeing their strongest sales in Asia, particularly China. So far, the growth is coming mostly from government-backed spending on construction and other projects, but demand from China’s traditionally frugal, relatively poor consumers is also rising.
The world’s third-largest economy began to falter in late 2008 as exports plunged and thousands of factories shut down, throwing millions out of jobs. China fought back with a $586 billion stimulus plan involving massive spending and bank lending for construction of infrastructure such as railways and roads to pump up the domestic economy.
Growth fell to a low of 6.1 percent in the first quarter, but rebounded to 7.9 percent in the second quarter, hitting 8.9 percent in the third quarter compared with a year earlier. That puts the economy on track to at least meet the official target of an 8 percent expansion for 2009.
With China in the forefront, “Asia appears to be leading the global recovery,” Federal Reserve chairman Ben Bernanke said earlier this week. “Recent data from the region suggest that a strong rebound is, in fact, under way.”
Yet sustaining the upswing beyond a few quarters hinges on stronger demand for exports from important markets such as the U.S., Europe and Japan which are emerging only slowly from the worst global recession since World War II.
“We’ll see strong growth from China for the next six months, possibly another year,” said Standard Chartered Bank economist Stephen Green. “The problem is what happens after another year and a half. What will be the growth driver then?” he said.
Industrial output rose 8.7 percent in the first three quarters of the year, and 12.4 percent in July-September — signaling accelerating demand for steel and other industrial goods.