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China's Stimulus Lifts Its GDP

Just when we were settling into the idea of a worldwide recession, China has reported its second-quarter growth rate at 7.9 percent. The People’s Republic has issued twice as much in new loans as the U.S. this year and, thanks to a $585 billion stimulus package, confidence and continued strong economic activity reign. However, some experts see problems with the Chinese model down the line.

The Wall Street Journal:

China’s government has turned around its economy far faster than most thought possible, as officials said Thursday that growth accelerated to 7.9% in the second quarter.

Even if the surge moderates in coming quarters, many analysts say China will very nearly meet its target of an 8% expansion for all of 2009. In the first quarter, gross domestic product grew 6.1% from a year earlier.

The Shanghai stock market’s benchmark index has gained 75% this year as the Chinese outlook has improved, with factory output, bank lending and commodity imports all continuing to accelerate in the past few months. Now, authorities face increasing questions about how long this growth can last, and how quickly the world’s third-largest economy can be weaned off its massive stimulus before longer-term problems take root.

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