China’s red-hot economy expanded by 8.7 percent last year but inflation surged towards the end of the year, according to government data released yesterday that laid bare the risks of overheating.
GDP in the world’s third-largest economy, which analysts say is on track to overtake struggling Japan, returned to double-digit growth in the fourth quarter of last year at 10.7 percent.
And it surpassed the government’s target of 8 percent for the year, a level that is seen as crucial to foster job creation and stave off social unrest in China’s urbanizing population of 1.3 billion people.
PHOTO: EPA
However, China’s biggest rise in inflation in 13 months underlined the broader challenges of breakneck growth, and came as the World Bank and International Monetary Fund warned anew that the country could face an economic bubble.
Ma Jiantang (馬建堂), commissioner of the National Bureau of Statistics, credited a government stimulus package worth 4 trillion yuan (US$586 billion) with holding up growth in a year when much of the global economy was in crisis.
“We need to prevent the overly fast increases in prices and keep a close eye on the trend in prices,” Ma added at a news conference, but said he believed inflation this year should be “mild and controllable.”
China’s consumer price index, the main gauge of inflation, rose 1.9 percent year-on-year last month. Authorities are already clamping down on bank lending and hiking borrowing costs to keep a lid on price pressures.
Yesterday, the People’s Bank of China raised the interest rate on its benchmark three-month treasury bills for the second time in two weeks in a bid to curb lending. Fears of further tightening by Beijing weighed on shares in Shanghai and Hong Kong.
“Policymakers will need to move soon to stop the economy from overheating,” said Brian Jackson, a Hong Kong-based strategist at Royal Bank of Canada. “We have already seen some initial steps in the direction of tighter policy, but higher rates and a stronger currency will also be part of the package.”
China’s urban fixed asset investment, a measure of government spending on infrastructure and a key driver of the economy, rose 30.5 percent last year while overall fixed asset investment rose 30.1 percent, yesterday’s data showed.
Industrial output from China’s millions of factories and workshops rose 18 percent in the fourth quarter, and 11 percent for all of last year.
Retail sales jumped 15.5 percent last year. Earlier this month, the government said exports had surged 17.7 percent last month, snapping a 13-month falling streak, and new loans nearly doubled last year from a year earlier to 9.59 trillion yuan.
The 10.7 percent growth in the final quarter was the best result since the second quarter of 2008.
It followed revised growth of 9.1 percent in the third quarter, 7.9 percent in the second quarter and a revised 6.2 percent in the first three months of last year.
The full-year figure exceeded analyst expectations, but was down from 9.0 percent in 2008 and was the slowest full-year increase in eight years.
The latest data is expected to increase pressure on Beijing to let its currency — effectively pegged to the US dollar since mid-2008 — to appreciate this year.
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