China was very much in the spotlight during the week, credited with both the ups and downs of the global stock market. The good news from China is that there are more and more signs of a turnaround in the econ-omy. The PMI industrial activity indicators currently suggest that the economy bottomed out in Q4, which is earlier than we and most others had anticipated (see Flash Comment - China: Ray of light in continued re-bound in manufacturing PMI). Other indicators also point to a turnaround in the Chinese economy. Credit growth has accelerated rapidly in recent months, which has normally been a sign of rising investment activity, and car sales have recovered well in recent months, with China overtaking the USA as the world's biggest car market.
Although Chinese exports are still under the weather and unemployment has risen, it now seems that the big fiscal policy stimuli, low interest rates and the lifting of credit restrictions, together with strong growth in real income due to falling inflation, have given the Chinese economy a serious shot in the arm. However, global equity markets reacted with some disappointment dur-ing the week when the Chinese premier failed to an-nounce a fresh stimulus package in his opening ad-dress at the National People's Congress. We have to say, though, that China is currently the country least in need of further stimulation. The steps already taken seem to be working, and so the administration can now afford to wait and see.
China was one of the last countries to be dragged into the global financial crisis, and now looks set to be one of the first to come out the other side.
