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China posts 13-year high economic rise

24 January 2008 09:41 (UTC +04:00)

The Asian juggernaut saw a fifth consecutive year of double-digit growth, with inflation at an 11-year high, the National Bureau of Statistics said, admitting that overheating remained a threat.
"The risk of the economy shifting from rapid (growth) to overheating still exists," Xie Fuzhan, the bureauâ€™s head, told a briefing in Beijing.
Chinaâ€™s economy last year totalled 24.7 trillion yuan, or 3.4 trillion dollars according to year-end exchange rates.
Growth in the fourth quarter of 2007 was 11.2 percent, a slight moderation from 11.5 percent in the third quarter, the bureau added.
Growth in Asiaâ€™s second-largest economy was boosted by record exports and massive spending on infrastructure.
The bureau confirmed previously released statistics which showed the trade surplus last year soared 47.7 percent to 262.2 billion dollars.
Investment in fixed assets, covering everything from bridges to new equipment in factories, rose 24.8 percent in 2007, the bureau said.
The rapid expansion came despite government efforts to cool the economy, including six interest rate hikes in 2007, amid concerns that inflation was rising to uncomfortable levels.
The statistics bureau said inflation last year had struck 4.8 percent, the steepest increase in 11 years. In December, the consumer price index was up 6.5 percent.
"A sharp increase in a range of daily necessities is causing deep pain to the vast poor majorities of rural population and a large percentage of Chinaâ€™s low-income urban population," Sumei Tang, an economist with ratings agency Moodyâ€™s said in a report on the figures.
"Failure to deal with inflation could incite social and political tensions."
Inflation has been fuelled mainly by a spike in food prices. The bureau said prices of meat, poultry and related products soared 31.7 percent in 2007.
However, imported inflation was another factor, Xie said, citing high oil prices.
"We need a number of measures to control price rises, but it will take time for these measures to show their effectiveness," said Xie.
Economists said China was constrained by what it could do, as a further hike in interest rates would widen the spread with US rates, which were sharply cut earlier in the week.
The spread could trigger further capital inflows to China, worsening inflation.
"China will not adopt multiple rate hikes. Rather, it will adopt credit controls and measures such as stricter approval procedures for new projects," said Wang Tao, a Beijing-based economist with Bank of America.
Growth is expected to remain robust at more than 10 percent in 2008, analysts said, but they added a looming global slowdown could aid Beijingâ€™s attempts to cool the economy.
"We look for headline GDP growth to moderate to 10.5 percent in 2008... as we expect sluggishness in the global economy to continue to weigh on near-term demand for Chinaâ€™s exports," JP Morgan said in a response to the GDP figures.
Xie also hinted a weakening US economy could help ease Chinese growth.
"The slowdown of the US economy will have a negative impact on the world economy," he said, adding Beijing was "closely watching" US developments.
Underpinned by record exports, industrial output expanded 18.5 percent in 2007, the bureau said. Retail sales, the key gauge of consumer spending, increased 16.8 percent.
Chinaâ€™s policy-makers have long complained consumption is too small and savings rates too high, and have tried various measures to lift it, including a boost to salaries.AFP