China's economy has shown signs of improvement, with the annual growth rates of both industrial output and retail sales rising in July 2009. July's industrial production rose 10.8% year-on-year, while retail sales grew at an annual rate of 15.2%. The concrete steps taken by the Chinese government to save the economy from the worst in global recession has helped to boost China's economy, which grew at an annual rate of 7.9% between April and June, up from 6.1% in the first quarter. But this is less than the double digit growth recorded in 2003-2007 periods, peaking at 13%, and the highest in the world.

China is known as the world’s cheap imports factory, and the Chinese boosted their economy with exports of cheap Chinese products. But, though exports fell year-on-year, it rose from June, adding $17.5bn to reach $105.4bn in July. However, there is rise in retail sales suggesting that domestic consumption has helped to counter the drop in foreign demand, and China wants to counter the global slowdown with rising domestic demand.

China currently is the holder of more US government debt than any other country. China's holding of US debt in 2009 is about 7% higher than 2008. In 2008, the Chinese increased their holdings in US debt by 52% over 12 months. China is worried about the US stimulus efforts will fuel inflation in the US, reducing the value of the dollar, eroding the value of the debt China holds in the US currency. So, in June, China cut its holdings of US securities by about $25bn, a fall of 3.1%.

The Chinese government's 4 trillion Yuan ($586bn; £355bn) stimulus package aims to boost domestic demand to speed up a quick recovery. China has a very large component of foreign direct investment and its stock market has one of the strongest influences on the world stock exchanges. Being the fastest growing economy of the world, when its stock prices took a downward spiral last week, trembles of it were felt worldwide stock markets including the US stock market, registering fall in stock prices. The only stock prices that were not hit were that of New Zealand and Australia. It is an indicator of how the growth or decline of Chinese economy can push up or pull down the world economy.