• Mainland China's economy showed more concrete signs of revival in the second quarter of 2009.  Despite persistent drop in exports, growth was underpinned by domestic demand on the back of government-led investment spending.

• Although investment in agriculture, transport, utility infrastructure, education and healthcare recorded particularly rapid growth in the first five months, the fact that investment in the manufacturing sector also grew strongly by 30% during the same period suggested that some of the spending might have added to idle capacity of the industrial sector.

• Another concern is the rapid pace of loan growth.  The net increase in Chinese renminbi-denominated (RMB) loans amounted to RMB660 billion in May, more than the RMB590 billion registered in the previous month.  If credit continues to rise at this rate for the rest of this year, the net increase in loans for 2009 would amount to RMB10.5 trillion, more than double the government's initial credit growth target of about RMB5 trillion for the year.  Even if loan growth slows for the remainder of the year, the ultimate net increase in new loans might be around RMB8 to 8.5 trillion for the year, representing a growth of 26-28% over 2008 for loans outstanding.

• The global recession of the present severity means that any economic recovery in the industrial countries is bound to be fragile and uncertain, implying that demand in the Mainland's major export markets is unlikely to have any notable rebound in the coming months.  However, with the government-led investment going at full steam, the Mainland economy is expected to grow at a slightly faster rate of about 8% in the second quarter, compared with a disappointing 6.1% growth recorded in the first quarter.

Mainland China's economy showed more concrete signs of revival in the second quarter of 2009.  Despite persistent decline in exports, growth was underpinned by strong domestic demand on the back of government-led investment spending.

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