HONG
KONG - China's economy expanded 11.4% in 2007, the
fastest expansion in 13 years, mainly powered by
exports and investment, even as growth slowed down
slightly in the fourth quarter, according to
government data released on Thursday.
Gross domestic product (GDP) increased to
24.66 trillion yuan (US$3.41 trillion) last year,
bringing the Middle Kingdom closer to overtaking
Germany as the world's third-largest economy after
the United States and Japan.
The full-year
growth, the highest since 1994, made 2007 the
fifth consecutive year that GDP has expanded 10%
or more, said Xie
Fuzhan, director of the
National Bureau of Statistics (NBS), at a press
conference in Beijing.
GDP growth slowed
in the last quarter of 2007 to 11.2% from 11.5% in
the previous three months and 11.9% in the second
quarter. The economy grew 11.1% from a year
earlier in the first quarter last year, suggesting
that government macro-economic controls to cool
the economy were taking effect, Xie said.
The government raised interest rates six
times last year and increased the minimum reserve
ratio of commercial banks as it sought to take the
steam out of the economy.
Of the three
power engines pulling forward China's economy,
exports and fixed-asset investment continued to
outgrow domestic consumption in 2007, according to
the NBS figures.
Exports grew 25.7% to
$1.218 trillion in 2007, though the growth was 1.5
percentage points lower than that in the previous
year, largely due to weaker US demand. Imports
rose 20.8% to $955.8 billion, giving a 2007 trade
surplus of $262.2 billion.
Actual foreign
direct investment in 2007 rose 13.6% to $74.8
billion.
The trade surplus and inflow of
foreign investment boosted China's foreign
reserves to $1.53 trillion by end of 2007, up
43.3% from a year ago.
A booming property
market accelerated the growth in fixed-asset
investment last year. Investment totaled 13.724
trillion yuan, up 24.8% on a year earlier and 0.9%
faster growth than in 2006. Investment in property
development last year increased 30.2% to 2.528
trillion yuan, NBS statistics released this week
showed. Developers are benefiting from strong
demand for housing, with the average housing price
in 70 major Chinese cities rising 7.6% last year.
Total retail sales of consumer goods,
China's yardstick for measure domestic
consumption, grew 16.8% to 8.921 trillion yuan,
3.1 percentage points higher than the rate of
increase in the previous year.
Xie said
without elaboration that China would take measures
to counter the negative impact on its economy of a
possible US economic recession. "Like others, we
are paying close attention to the US economy and
its impact on the world economy and China's
economy. The United States and China are both
important power engines for world economic growth.
A slowing US economy no doubt would have a
negative impact on the outlook of the global
economy ... China will accordingly take relevant
measure to reduce such negative impact."
The policy-setting Central Economic Work
Conference at the end of last year decide to carry
out a "prudent" fiscal policy, which means China
will continue to increase government spending to
sustain growth when exports are likely to slow
down.
Declining to predict GDP growth in
2008, Xie expected China's economy would continue
to grow "steadily and fast", adding that "a little
bit slowing down in the growth rate should also be
within our expectation".
Earlier, Fan
Caiyue, an official with the National Development
and Reform Commission - the country's top economic
planning agency, said China's 2008 GDP growth was
estimated at 11%.
Inflation The
country's consumer price index (CPI), a key
measurement of inflation, advanced 4.8% in 2007,
including an 11-year high of 6.9% in November, and
higher than the government's target of 3% for the
year.
Inflation in China has been fueled
mainly by a spike in food prices. NBS said the
price of meat, poultry and related products
increased 31.7% in 2007 and the price of general
foodstuffs gained 12.3%, pushing CPI up by 4
percentage points.
Imported inflation was
also part of the equation, the bureau said, citing
the high price of oil.
The government now
appears to see inflation as public enemy No 1,
awake to the possibility of social instability if
discontent grows over prices increases of meat,
oil and other daily necessities. Rising living
costs were considered one reason people joined the
1989 student-led demonstrations at Tiananmen
Square that ended with the bloody June 4 crackdown
that year. Inflation at the time stood at around
25%.
Inflation "is quickly spreading from
'just' an economic issue to a potential social
instability threat," said Michael Kurtz, an equity
strategist at Bear Stearns Ltd in Hong Kong,
according to Bloomberg.
Decided by the
Central Economic Work Conference, China will adopt
a "tighter" monetary policy to tighten credit to
help curb inflation and excessive liquidity. Last
week the government began to impose price controls
on foodstuffs and raised again the required
reserve ratio for commercial banks by half a
percentage point.
Xie said China would
continue face inflation pressure this year. "Even
without any new factor to stimulate inflation, we
still face the pressure of the carrying-forward
inflation from last year. We need a number of
measures to control price rises, but it will take
time for these measures to show their
effectiveness."
Fitch Ratings forecast
today that inflation will average more than 5%
this year, compared with an earlier Chinese
Academy of Sciences prediction of 4.4%.
The Ministry of Finance meanwhile said the
country's state-owned enterprises posted a 31.6%
rise in 2007 total profits, buoyed by a strong
economy. Total profits rose to a record 1.62
trillion yuan from 1.23 trillion yuan a year
earlier, a ministry statement said.
The
higher profits from 119,000 state-owned
enterprises helped boost government coffers as
they paid a record 1.57 trillion yuan in taxes
last year, up 21.8%. Sales revenues grew 20.1% to
18 trillion yuan.
John Ng is a
freelance journalist based in Hong Kong.
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