On Friday, the National Bureau of Statistics released economic numbers for last month. Most analysts were pleased with the results, and the stock market surged on the news, but in fact the data has managed to confirm both the hopes of the optimists and the fears of the pessimists.
Manufacturing output rose a higher than expected 12.3 per cent. Net new lending for the month was 410 billion yuan (HK$465.31 billion), less than half the average this year but more than the rumours of 300 billion yuan that had panicked the market last week. Exports declined 23.4 per cent and imports fell 17 per cent, both substantially worse than expected, leaving the trade surplus at a still hefty US$15.7 billion.
For the optimists, the economic numbers, with the exception of the trade data, were all positive and suggested the mainland was on track to recovery. For them, the great risk to China was that the global contraction in demand would result in terrible damage to the country's export industry and would cause factory closings and soaring unemployment.
The main purpose of the stimulus package, in that view, was to forestall an economic contraction and with it the possibility that the economy would fall into an ugly process in which rising unemployment would cause a contraction in mainland consumption, which, when added to the contraction in foreign demand for Chinese exports, would push the economy into a tailspin.
In that sense, the stimulus has proven to be a great success. Mainland growth has slowed, but by a lot less than expected, and unemployment seems to be manageable.
For pessimists, however, the global contraction underscored Chinese vulnerability to out-of-control US consumption, and the need to develop a more balanced approach in which mainland consumers took a larger share of the country's production. This vulnerability existed because China was overly reliant on investment for its growth.
