Mainland China's economy remained fragile in April, with exports and imports plummeting further by 23% each. Domestic demand continued to be the main growth driver. Fixed asset investment, in particular, surged 34% in April after climbing 29% in the first quarter.

Investment in the real estate sector was still weak, and property prices continued to fall, albeit mildly, in most of the cities. However, sales of residential properties around the country have been rebounding as affordability improved following the central government's relaxation of housing-related tax charges and lowering of downpayment requirements in late 2008.

With limited prospects of a quick turnaround in external demand as most of the industrialized world remains in recession, the Mainland has launched more measures to stimulate domestic consumption and investment, including subsidizing the trade-in of certain household appliances and reducing the capital requirement of investment projects for obtaining bank credits.

New bank loans amounted to only RMB592 billion in April compared with a monthly average of RMB1,537 billion in the first quarter as a result of stricter government scrutiny. While new loans are expected to be between RMB200 billion and RMB500 billion a month for the rest of this year, this should be adequate to meet the Mainland's investment needs for attaining the 8% growth target.

China Economic Monitor (June 2009). Hang Seng Bank Limited. All rights reserved. Reproduction of article(s) in whole or in part is permitted provided the source is quoted. Please direct any inquiry to Economic Research Department, G.P.O. Box 2985, Hong Kong.

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