China's factory output surges to a 19-month high

If the data on factory output is anything to go by, looks like China has put the ill effects of the global financial crisis behind it. As reported in a leading business daily,Chinese factory output surged to a 19 month high in October. Having said that, there was a dip in the pace of investment and loan growth and exports have yet to take off in a significant manner as the US and Europe are still reeling from recession.

Despite this, the Chinese economy is expected to log in a decent 8% growth in GDP in 2009. While domestic demand seems to be improving, it is the excess liquidity that is also playing a role in bolstering growth. Famed economist Andy Xie was certain that the Chinese bubble was set to pop.

More importantly, there are concerns that global investors are confusing the Chinese 'stimulated' growth with sustainable growth. It is well known that a large part of the growth in China's economy over the past decade came from exporting and lending to the US. Now with the latter in a deep recession, the former is suffering from overcapacity. Hence, even if China does manage to grow its economy by 8% this year, it remains to be seen whether the same will be sustainable in the next two years.