The green shoots that some economists see peeking up through the recession may not be made of bamboo just yet.
China's economy continues to suffer, a raft of economic figures released for July reveal, but Beijing's enormous $585 billion stimulus program seems to be catalyzing spending at home.
"With the global recovery unlikely to be smooth, domestic demand is likely to remain the primary engine of growth in the remainder of 2009," Jing Ulrich, the chairman of China equities at Morgan Stanley, wrote in a research note.
China's explosive growth, as in much of Asia, has been a story about exports. But with the recession making it harder for Chinese companies to sell their goods to cash-strapped foreign buyers, the central government needed to pump money back into the economy to encourage both consumers and Chinese companies to spend more.
As a result, fixed-asset investment levels increased 32.9% in July as infrastructure projects boomed. The effort to boost spending continues: Ulrich noted that the country's vice minister of Commerce recently said China might slash duties on luxury goods, which could lure spending away from duty-free meccas like Hong Kong.
July's results show a mixed scorecard for the Chinese economy.
Industrial production, the engine of the country's growth, has risen 10.8% so far in 2009, which set a nine-month record but came in below analysts' estimates. Monthly exports also rose in July, although they remained 23% below last year's levels.
Although both the consumer and producer price indexes declined in July for the sixth and eighth straight month, respectively, economists are worried more about inflation than deflation as the recovery ramps up. The market for A shares is up 95% this year, and housing prices are climbing again. Steel prices have been rising since October and are expected to continue to rise over the next two months, while retail sales have risen 15.2% so far this year.