China's industrial sector showed signs of recovery in the first half of this year as the government economic stimulus started to take effect. But excess production capacity, weak overseas demand and sluggish private investment were still hampering a full recovery of the country's economy, analysts said.

Workers operate the assembly line at the Changan Ford Mazda Plant in Nanjing. [Bloomberg News]

The industrial output increased by 7 percent in the first six months, with the corresponding year-on-year growth rate surging from 3.8 percent in the first two months of this year to 10.7 percent in June, the Ministry of Industry and Information Technology (MIIT) said yesterday.

During the first six months, the raw material and equipment manufacturing sectors' output grew by 6.9 percent and 9.2 percent respectively from a year ago, the ministry said.

"China's industrial sector was on a recovery path in the first half of this year," said Zhu Hongren, director of the department of operations monitoring and co-ordination at the MIIT.

He said the government's 4-trillion-yuan economic stimulus package and its efforts to encourage consumer spending in areas such as autos and electronics products have played a great role in the recovery.

China's auto sales increased by 16.4 percent in the first six months, with vehicle shipments reaching 6.23 million. The electronics industry, which had been severely impacted since last year due to the sharp decline in overseas demand, also increased by 6.5 percent in June, according to the MIIT.

Zhang Yongjun, a senior economist with the State Information Office, said that the stimulus package would continue to boost the industry in the next six months, during which "there will be more signs of economic recovery".

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

Despite the increasing growth rate, Zhu from the MIIT said excessive industrial production capacity in certain sectors, sluggish overseas demand and weak investment from private sectors would pose a great challenge to the recovery of China's economy.

"The positive changes in the country's economic development do not mean an end to difficult times," said Zhu, noting that it was still a challenge to maintain steady growth in the industrial sector.

According to the MIIT figures, the shipbuilding sector, which had 16 million deadweight tons (DWT) of excess capacity, still recorded a 55.5-percent investment increase in the first five months this year.

Investment in the cement industry, which the government has tried hard to cool down in recent years, surged 78.6 percent in the period.

(China Daily July 23, 2009)