As ordained by Party Central, China’s economic growth is now approaching the official target of 8 per cent after that unfortunate blip caused by the global slump and credit crunch in the six months to March.

Figures released by Beijing this morning said the economy grew at an annualised rate of 7.9 per cent in the June quarter, up from 6.1 per cent in the March quarter. For the six months to June, the economy grew 7.1 per cent compared to the same period in 2008.

The official figures were released by the country’s National Statistics Bureau.

The news will be greeted with quiet thanks in Australia where our economic and monetary policy is based to a large degree on a China rebound.

The 8 per cent target will be topped this quarter, thanks to the hundreds of billions of dollars in official stimulus cascading through the economy: that has sparked an enormous surge in the stockmarket which hit 13 month highs on several days this week and moved past the Japanese market in terms of value at the close on Wednesday.

Government spending has boosted investment, and seems to be sparking a recovery in property house prices, keeping retail sales bouyant, but not doing very much to help exports.

They were down 21 per cent in June, according to unofficial figures. Not as bad as May’s steep 25 per cent fall, but not good as Western demand remains sluggish. Imports fell 13 per cent in June, compared to much bigger 20 per cent plus falls in the preceding five months. This is a sign of the economy sucking in more raw materials, even if they are cheaper, such as oil, gas, coal and iron ore.

Crikey reported earlier this week that iron ore exports surged 29 per cent in the first half of this year, with steel production running at near record levels in the past quarter of over 50 million tonnes a month with a record annual figure of over 550 million tonnes likely.

Imports of other raw materials, like copper and aluminium, hit record levels, but now there’s growing suggestions that China has decided to stop stockpiling for the time being.

Power generation rose in June for the first time in 9 months. That’s become a closely watched indicator in the west. Car sales were up 48% in June after rising 47% in the month before. That’s helping chew up a lot of steel, and iron ore and coal from countries like Australia. Sales of locally made cars jumped 36.6% as well in June: total sales were 1.1 million units, or more than in the US. Figures out yesterday hit a record $US2.13 trillion at the end of June, the highest ever. It was up a strong $US175 billion or more (Just $US7.7. billion in the first quarter).

Valuation effects from a weak dollar and stronger euro and yen might have had an impact, but some analysts reckon there was a surge of so-called hot money into China in the quarter as global fund managers and other investors got more confident about the strength of the recovery engineered by the Government’s $$US585 billion of stimulus spending from national, state and local government.

The fall in the trade surplus in the June half compared with a year ago, meant there was less money added to reserves, foreign direct investment fell 17.9 per cent in the six months to just over $US43 billion, leaving analysts to look for hot money inflows.

The Financial Times Lex column speculated today: “Reserve accumulation, was the lowest in three years. At about $60bn, it was also about half last year’s quarterly average of $100bn, according to Royal Bank of Scotland. Rather, China’s hoarding is being driven by speculative funds.”

“After all, China, the world’s favourite green shoot is back in bubble land; its reserve growth is just one indication of this. Poor data mean estimates vary widely, but some $30bn to $70bn of hot money flowed into China in the second quarter.

“Much of that is flowing into real assets such as property or the stock market, where trading volumes are three times last year’s levels.”

Chinese banks (actually the Government in another guise) have been throwing money at business and others across the country with loan growth in the first five months of the year more than budgeted for by the Government.

The central bank is getting worried; there have been warnings from officials and from other regulators about untoward lending, and this week the People’s Bank of China started re-issuing so-called sterlisation bonds of 1 year duration to start mopping up surplus cash in the system. Money supply growth is growing at close to an annual 30 per cent.