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China's economic boom continues

By: EBR - Posted: Friday, October 21, 2005

China's economic boom continues
China's economic boom continues

China's economy grew strongly in the first nine months of the year, despite efforts by the government to put the brakes on growth.

The National Bureau of Statistics said the economy was 9.4% bigger than a year ago, but said that trade imbalances threatened economic stability.
The government is encouraging domestic demand, while trying to reducing reliance on investment and exports.
It also has concerns about agriculture, and high levels of government spending.

'Good momentum'
It was the ninth straight quarter of annual growth of 9% or higher, and followed rises of 9.5% in the second quarter and 9.4% in the first.
National Bureau of Statistics spokesman Zheng Jingping said: "The nation's economy has continued to develop towards the target of macro-regulation as a good momentum of steady and rapid growth is maintained."
Total GDP for the nine months from January to September grew to total 10.627 trillion yuan ($1.3tr; £738bn).
The government has attempted to slow the economy by putting interest rates up, revaluing the yuan, and restricting credit levels.
It is also trying to limit investment in industries such as steel, cement and aluminium, but high-tech industries are still investing heavily.

Imbalance
There are have been growing concerns about an economic imbalance between urban and rural prosperity and investment, with many people moving from the countryside to the city.
The latest economic report acknowledged that Chinese farmers' incomes are not growing fast enough.
Earlier this month, following a meeting of the Communist Party senior officials, it was proposed to move away from the country's policy of breakneck economic growth in favour of improving social provisions, particularly in the countryside.

Exports booming
The OECD has forecast growth of 9% for the whole year for China, something Mr Zheng said was possible.
He highlighted the foreign trade imbalance and slowing profits in the industrial sector as other issues that need tackling.
China's booming exports moved the trade surplus up to $68.3bn in the first nine months.
Exports rose 31.3% to $546.4bn while imports were up $16% to $478.1bn.
Despite the recent revaluation, the US perceives the Chinese currency as still being fixed at an artificially low rate, thus boosting Chinese exports.
US Treasury Secretary John Snow on a recent visit to China has called for the yuan to float higher or face protectionist pressures from the US Congress..

Inflation eases
Fixed asset investment, largely government spending on infrastructure such as bridges, factories and power plants, continued to grow at 26.1% year-on-year in the nine months to September.
"We are concerned the overheating fixed asset investment has still not yet been effectively controlled," said Grace Ng, a JP Morgan economist in Hong Kong.
The consumer price index was up 0.9%, and the producer price index was up 4.5%.
"We're seeing inflationary pressure continue to ease in China, largely on the back of food prices, and I think the discussion going forward is that we would see a low inflation environment and maybe a hint of deflation as well," said Tai Hui, an economist with Standard Chartered Bank in Hong Kong.
However, Mr Zheng said that China would raise some prices of oil-related products to discourage consumption.

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