China economy grows 10.3pct, inflation fears mount

22-Jan-2011 Intellasia | AFP | 7:01 AM Print This Post

China said Thursday that its economy grew 10.3 percent in 2010, marking the fastest annual pace since the onset of the global crisis, but concerns about persistent inflation sent Asian markets tumbling.

The data has fuelled expectations for a stronger currency — a change that Washington has pressed for during President Hu Jintao’s high-profile US visit this week — as China pulls on a variety of levers to rein in consumer prices.

Gross domestic product rose 9.8 percent in the fourth quarter, accelerating from the previous quarter and exceeding analysts’ expectations, cementing China’s position as the world’s second-largest economy.

While consumer inflation in December eased from the previous month, it remained stubbornly high at 4.6 percent despite Beijing’s efforts to rein in prices, spooking investors in the region who fear further tightening measures.

A worker sews at a garment factory in Pinghu, some 100 kms from Shanghai. China says its economy grew 10.3 percent in 2010, marking the fastest annual pace since the onset of the global crisis, but concerns about persistent inflation have sent Asian markets tumbling. AFP


Shanghai’s stock market closed down 2.92 percent, Hong Kong fell 1.7 percent, Tokyo dropped 1.13 percent and Sydney lost 1.05 percent. Seoul closed 0.43 percent lower.

Analysts said the pick-up in growth in the fourth quarter — partly driven by stronger exports — and the still high inflation in December supported the case for further interest rate hikes, lending curbs and currency appreciation.

“Policymakers will not claim a big victory on the fall of CPI inflation to below five percent in December,” said Lu Ting, an economist at Bank of America-Merrill Lynch.

Royal Bank of Canada analyst Brian Jackson said he expected to see “further currency appreciation” as policymakers work to “keep the economy on an even keel”.

The 2010 GDP figure, up from a revised 9.2 percent growth in 2009 and better than the 10 percent forecast by the World Bank, highlighted China’s growing might in a year when other major economies remained in the doldrums.

“Currently the economy is in a critical period of transforming from recovery to stable growth,” Ma Jiantang, Commissioner of the National Bureau of Statistics, told reporters.

Ma said China would boost efforts to transform its “economic growth pattern” — echoing comments made Wednesday in Washington by President Hu, who pledged to boost domestic demand and spending.

The country’s consumer price index, the main gauge of inflation, rose 3.3 percent for all of 2010 — exceeding the government’s full-year target of three percent as food costs soared.

The December figure was slightly better than the 5.1 percent increase in November, which was the fastest pace in more than two years.

“In 2011, we need to take the task of controlling prices very seriously,” Ma said, but added: “We should have full confidence that we will be successful in 2011.”

Analysts said the government was facing a tough task.

“Price pressures will remain uncomfortably strong in the months ahead, and the dip in headline CPI inflation in December will likely be temporary,” said Jackson.

For IHS Global Insight analyst Alistair Thornton, “a new wave of credit expansion is driving inflationary pressure, in both consumer prices and asset markets, with a re-acceleration in construction and fixed investment.”

Output from the country’s millions of factories and workshops rose 15.7 percent for all of 2010 as government spending on infrastructure in urban areas rose 24.5 percent over the 12 months.

Retail sales rose 18.4 percent in 2010.

As the United States and Europe struggle to spur growth, Beijing has been trying to slow its economy and stem a flood of liquidity that is fanning inflation and driving up property prices, straining household budgets.

The central bank last Friday again ordered banks to increase the amount of money they keep in reserve, effectively putting a cap on lending, after raising interest rates twice in the fourth quarter.

http://malaysia.news.yahoo.com/afp/20110120/tap-china-economy-8d4ea94.html

 


Category: China

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