July 17 (Bloomberg) -- China’s economic comeback is under way, towing along companies from Intel Corp. to Hyundai Motor Co. and starting to make up for weak demand in other major economies. The world’s third-largest economy grew 7.9 percent in the second quarter from a year earlier after expanding at the slowest pace in almost a decade in the previous three months, the statistics bureau said yesterday. The first acceleration in growth in more than two years came after the government implemented a 4 trillion yuan ($585 billion) stimulus plan and prodded banks to lend more. China is the only one of the 10 biggest economies that is expanding, highlighting the role the nation may play in easing the worst global recession since the Great Depression. The U.S. economy is still shrinking, five months after Congress agreed to President Barack Obama’s $787 billion stimulus package. “China cannot save the world by itself, but its recovery is a definite positive,” said Brian Jackson, a strategist at Royal Bank of Canada in Hong Kong. “China has a lot more control over how its banks do business and they were in a lot stronger position than U.S. banks to implement policy stimulus.” The Chinese economy will expand 8.1 percent this year, according to the median forecast of 16 economists surveyed by Bloomberg News after the government released the second-quarter figure. Growth will accelerate to 9.1 percent in 2010, they estimated. The pickup, driven by tax cuts and government-funded incentives to encourage consumers to buy automobiles and electronics goods, is bolstering demand for imports. Asian Consumers Intel says consumers in Asia -- especially China -- are leading a recovery in demand for personal computers. The Santa Clara, California-based company’s sales in the Asia-Pacific region rose 21 percent to $4.41 billion in the past quarter, while sales in the Americas and Europe plunged. “We are seeing Asia-Pacific stronger than the rest of the world; in particular, consumption in China looks very good,” Stacy Smith, Intel’s chief financial officer, said in an interview with Bloomberg Television on July 14. “Mature markets are lagging a little bit behind.” Seoul-based Hyundai’s sales in China surged 56 percent from a year earlier to 257,003 units in the first half, making the country its biggest overseas and fastest-growing market. Sales by South Korea’s largest automaker in the U.S., which used to be its biggest market, dropped 11 percent to 204,686 units, according to the company. Investment Surge Government-influenced spending is driving more than four- fifths of China’s expansion, according to the World Bank. Urban fixed-asset investment surged 33.6 percent in the first half, the fastest growth in five years. Industrial production increased 10.7 percent in June from a year earlier, the largest gain in nine months. “China’s recovery is major positive news, especially for commodities exporters,” said Wang Tao, an economist with UBS AG in Beijing. “The strongest factor in China’s recovery is investment demand, which means it will import more commodities and machinery.” Chinese imports of copper and its products jumped to a record in June, increasing 13 percent from the previous month. Iron ore imports rose 3.4 percent in June to the second-highest level this year, as rising prices prompted steelmakers to produce more and buy more raw materials. Komatsu’s Upswing The Chinese government unveiled its stimulus package in November, four months before Obama’s measures were approved. The stimulus has boosted sales for construction equipment-maker Komatsu Ltd., while subsidies to encourage consumer spending have boosted sales for manufacturers such as Tokyo-based Nissan Motor Co., Japan’s third-largest automaker, and plastics-maker Teijin Ltd. in Osaka. Tokyo-based Komatsu, the world’s second-biggest maker of earthmovers, said last month its sales in China probably beat expectations in the quarter ended June 30. The company expects the market to grow to about 15 percent of total sales this business year, compared with 10 percent in 2008. AU Optronics Corp. and Chi Mei Optoelectronics Corp., Taiwan’s two biggest liquid-crystal display makers, said last week they expect third-quarter sales to rise from the previous three-month period, because there is a global shortage of glass while demand from China is strengthening. In June, China’s TV makers said they planned to purchase $4.4 billion of flat-panel products from Taiwan this year, doubling their December forecast. ‘Cautious Optimism’ “What you’re seeing happening in emerging Asia, not just China, is encouraging,” U.S. Treasury Secretary Timothy Geithner said in a Bloomberg Television interview in Paris yesterday. “It provides some basis for cautious optimism that we’re going to start to come out of this over the next few quarters.” Federal Reserve Chairman Ben S. Bernanke will brief Chinese officials at a summit this month about how the U.S. plans to keep inflation in check over the next few years, according to people advised on the plans. David Loevinger, a U.S. Treasury official coordinating the meeting, told business lobbyists and lawyers in Washington this week that the Obama administration was enlisting Bernanke to try to assuage Chinese concerns about long-term U.S. economic health, people at the meeting said on condition of anonymity. China, the largest foreign investor in U.S. Treasuries, increased its holdings to $801.5 billion in May. It’s still too much to hope that China can rally the world, given that its stimulus has been focused on bolstering demand at home, said Robert Carnell, chief international economist at ING Financial Markets in London. “There will be some economies that benefit on the sidelines, but that’s not going to help the average Joe on a street in America,” he said. “Its economy is not going to offset the U.S. and Europe declining simultaneously.” To contact the Bloomberg News staff on this story: Kevin Hamlin in Beijing on khamlin@bloomberg.net;

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