China to Drive Domestic Demand

Zhang Hanya, the head of China's investment association, a think tank affiliated with China's economic planning agency, was quoted as saying that boosting investment is the only choice for Beijing to bolster growth since consumption is always stable and exports are meeting overseas demands.

Spending on roads, bridges, subways and airports will boom as investments in industrial facilities will worsen overcapacity and more property investments are discouraged by Beijing, Zhang said.

China has to rely on infrastructure investment to manage economic slowdown, Zhang was quoted as saying.

China's economy grew at its weakest pace in nearly three years in the first quarter of 2012, with the annual rate of expansion slowing to 8.1 percent from 8.9 percent in the last quarter of 2011.

The Ministry of Finance has accelerated fiscal spending. In March alone, fiscal expenditures jumped 34.7 percent from a year ago to 1.02 trillion yuan, exceeding the month's revenues of 905.8 billion yuan.

Zhou Xiaochuan, the People's Bank of China governor, said in a statement at the weekend China would try to maintain robust, sustainable and balanced growth.

Investment, usually the chief engine for the world's No.2 economy, contributed only 2.7 percentage points of GDP growth in the first quarter.

China's factories stabilised in April as output ticked higher, new business rose from multi-month lows and export orders perked up, though not sufficiently for a private sector survey of purchasing managers to flag a return to expansionary territory.

The HSBC Flash Purchasing Managers Index, the earliest indicator of China's industrial activity, recovered slightly to 49.1 in April from a final reading of 48.3 in March, but still remained below the level that signifies contracting economic activity for the sixth month running.

The index pointed to a slower pace of deterioration than in March, largely reflecting slower rates of decline of manufacturing production and new orders, Markit Economic Research, which publishes the index, said on Monday.

The HSBC Manufacturing PMI index has not been consistently above 50 since June 2011, although it is far above readings of the low-40s reached during the depth of the global financial crisis in late 2008 and early 2009.

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Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reached a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.Read the Terms of Service