There were fears that a reduction in lending in the second half of 2009 would damage the Chinese economy. Yet, it looks like the stimulus and huge lending experienced in 1H09 might have been sufficient to buoy the Chinese economy after all. Just look at the following three metrics:
1. Industrial output in 8/09 was up 11.8% (annualized). That comes on the back of a 10.8% annualized increase in July.
2. Retail sales were up an annualized 15% in August
3. Alcoa (the largest aluminum producer in the US) has raised its 2H09e forecast of global consumption, citing the Chinese car market as a primary driver. They estimate that in 2009 China will overtake the US as the largest car market globally with 12m unit sales. Alcoa was up 3.45% (beating the S&P’s +0.88% performance).
All of this has been good news for the market – rising now for 6 consecutive days after dropping 20% in August.