Country Report China June 2009

Summary

The government's main priority is to support the economy amid concerns that rising unemployment could increase social unrest. But even if unrest grows, it is unlikely to result in a nationwide anti-government movement.
Accountability will improve within the ruling Chinese Communist Party (CCP), but wider reforms to increase democracy will not occur. The government's campaign against official corruption will intensify.
The Economist Intelligence Unit expects real GDP growth to slow sharply owing to the global economic recession. In 2009 real GDP will grow by just 6.5%. Growth will recover in 2010, but only to 7.3%.
The economy will be supported by a rapid expansion of government infrastructure spending and policies to revive housing investment. However, this will lead to a substantial rise in the budget deficit.
Amid slowing demand and falling commodity and food prices, consumer prices are expected to decline by an average of 0.5% in 2009.
The outlook for exports is poor, but falling commodity prices will also depress imports. As a result, the trade surplus will remain huge. The current-account surplus will narrow to 7.4% of GDP in 2009 and 5.6% in 2010.

The memoirs of a former CCP head, Zhao Ziyang, were published in May, ahead of the sensitive 20th anniversary of the massacre in Tiananmen Square in the capital, Beijing, in 1989 as a result of which Mr Zhao fell from power.
China and Taiwan have agreed a series of measures designed to strengthen bilateral ties and economic integration.
Total foreign- and local-currency lending was up by 27% year on year at the end of April. At Rmb4.6trn (US$674bn), new local-currency loans in the first quarter of 2009 were Rmb3.3trn higher than in the year-earlier period.
In January-April tax revenue fell by 9.9% year on year, to Rmb2.1trn. Government spending rose by 31.7% year on year in the same period, to Rmb1.8trn.
In April industrial output growth slowed to 7.3% year on year, from 8.3% in March. Electricity production, which is often taken as a proxy for economic activity, contracted by 3.5% year on year in April.
In April unions forced a US-based retailer, Wal-Mart, to reconsider plans for a restructuring of its workforce. In a separate case, hundreds of employees at a Chinese Internet search-engine firm, Baidu, went on strike in May.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60
NAICS Code: 52