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Overcapacity undermines China's industrial recovery
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16:16, July 22, 2009

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Latest GDP figure is right on the money
China’s economic recovery,are we there yet?

The foundation of a recovery in China's industrial sector is still not solid and faces many uncertainties, Zhu Hongren, spokesman of the Ministry of Industry and Information Technology (MIIT), said Wednesday.

"The positive changes in the country's economic development do not mean the end of difficult times," Zhu said at a press conference. "It is still a challenge to maintain a steady development in the industrial sector."

China's economy expanded 7.9 percent year on year in the second quarter this year, up from 6.1 percent in the first quarter and 6.8 percent in the fourth quarter last year.

Industrial output rose 10.7 percent in June from a year earlier,1.8 percentage points higher than May, according to the National Bureau of Statistics.

However, excess production capacity and blind investment in some industries were still major problems, said Zhu.

The ship building sector, for example, which had 16 million deadweight tons (DWT) of excess capacity, recorded a 55.5-percent increase in investment in the first five months this year, he said.

Meanwhile, price falls led to lower company profits despite expanding production, Zhu said.

The producer price index (PPI), a major measure of inflation at the wholesale level, fell 7.8 percent year on year in June. Purchase prices of raw materials, fuel and energy fell 8.7 percent year on year in the first half.


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