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.
NO-LIMITS PARTNERSHIP: ‘The bottom line’ is that if the US were to have a conflict with China or Russia it would likely open up a second front with the other, a US senator said Beijing and Moscow could cooperate in a conflict over Taiwan, the top US intelligence chief told the US Senate this week. “We see China and Russia, for the first time, exercising together in relation to Taiwan and recognizing that this is a place where China definitely wants Russia to be working with them, and we see no reason why they wouldn’t,” US Director of National Intelligence Avril Haines told a US Senate Committee on Armed Services hearing on Thursday. US Senator Mike Rounds asked Haines about such a potential scenario. He also asked US Defense Intelligence Agency Director Lieutenant General Jeffrey Kruse
STUMPED: KMT and TPP lawmakers approved a resolution to suspend the rate hike, which the government said was unavoidable in view of rising global energy costs The Ministry of Economic Affairs yesterday said it has a mandate to raise electricity prices as planned after the legislature passed a non-binding resolution along partisan lines to freeze rates. Chinese Nationalist Party (KMT) lawmakers proposed the resolution to suspend the price hike, which passed by a 59-50 vote. The Taiwan People’s Party (TPP) voted with the KMT. Legislative Speaker Han Kuo-yu (韓國瑜) of the KMT said the resolution is a mandate for the “immediate suspension of electricity price hikes” and for the Executive Yuan to review its energy policy and propose supplementary measures. A government-organized electricity price evaluation board in March
NOVEL METHODS: The PLA has adopted new approaches and recently conducted three combat readiness drills at night which included aircraft and ships, an official said Taiwan is monitoring China’s People’s Liberation Army (PLA) exercises for changes in their size or pattern as the nation prepares for president-elect William Lai’s (賴清德) inauguration on May 20, National Security Bureau (NSB) Director-General Tsai Ming-yen (蔡明彥) said yesterday. Tsai made the comment at a meeting of the Legislative Yuan’s Foreign Affairs and National Defense Committee, in response to Democratic Progressive Party (DPP) Legislator Wang Ting-yu’s (王定宇) questions. China continues to employ a carrot-and-stick approach, in which it applies pressure with “gray zone” tactics, while attempting to entice Taiwanese with perks, Tsai said. These actions aim to help Beijing look like it has
China is mischaracterizing UN Resolution 2758 for its own interests by conflating it with its “one China” principle, US Deputy Assistant Secretary for China and Taiwan Mark Lambert said on Monday. Speaking at a seminar held by the German Marshall Fund, Lambert called for support for Taiwan’s meaningful participation in the international community at a time when China is increasingly misusing Resolution 2758. The resolution had a clear impact when it changed who occupied the China seat at the UN, Lambert said. “Today, however, the PRC [People’s Republic of China] increasingly mischaracterizes and misuses Resolution 2758 to serve its own interests,” Lambert said. “Beijing