China trade and loan surge boosts economy

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China trade and loan surge boosts economy

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The latest economic statistics from China show a solid recovery in domestic and overseas demand.

Exports grew 20 percent in January from a year earlier while imports surged 28.8 percent, both much higher than forecast.

New lending by the country’s banks soared, doubling from December.

But economist Wayne Arnold said a lot of the growth comes from government spending and property investment which is risky: “The risks are getting larger. It doesn’t mean we’re going to see a recession in China, or chaos in China, or a hard landing in China, but it does mean the problems for Beijing get bigger and bigger and they have to figure out other ways to dismantle those problems.”

Others however pointed to the strength of imports into China, saying that was a good indicator for the health of the domestic economy, though one element of that was companies stocking up ahead of this week’s Chinese New Year celebrations.

The stronger-than-expected exports indicated signs of a recovery beyond China’s borders in the giant economies of the United States and the European Union.

The stronger growth does also raise red flags about inflationary pressures building though consumer-price gains did slow in January from a year earlier.

January’s consumer inflation fell to 2.0 percent from December’s seven-month high of 2.5 percent, suggesting price pressures are subdued for now.

Economists expect inflation to gather steam through the first quarter, though likely staying below 3.5 percent in 2013, a level they think the government will soon announce as its target.