China's economy expanded at its fastest pace in 13 years in 2007
even after a slowdown in the fourth quarter, amid rising inflation,
official figures showed on Thursday.
The country's Gross Domestic Product (GDP) grew 11.4 percent
last year from 2006, said Xie Fuzhan, head of the National Bureau
of Statistics (NBS) at a press conference in Beijing.
That marked a fifth year of double-digit growth for the world's
fourth largest economy after the US, Japan and Germany. The
increase was especially remarkable given the fact that the United
States is experiencing a slowdown due to the sub-prime crisis and
housing slump.
Coupled with China's phenomenal growth was accelerating
inflation which hit 4.8 percent for the whole year, far above the
central bank's target of three percent.
The monthly CPI for December dropped slightly from the previous
month to 6.5%, but it was still at a fairly high level. The
government has announced a series measures to bring down the
consumer prices before the traditional Chinese holiday, the Spring
Festival.
GDP expansion slowed down to 11.2 percent in the
October-December period, Xie said, thanks to the tightening
measures by regulators. The People's Bank of China (PBOC), the
central bank, raised interest rates six times and hiked the bank
reserve ratio 10 times in 2007, in addition to capping bank
loans.
The PBOC will continue to rein in credit, as part of a "tight"
monetary policy adopted by policymakers to keep the economy from
overheating and to tame inflation.
As part of the monetary tightening, the PBOC last week ordered
the commercial banks to set aside a record 15 percent of their
deposits as reserves, up from 14.5 percent.
However, several analysts expect a slight ease in monetary
policies later this year due to the impact of a possible global
slowdown on China's economy.
"The central bank is now very aggressive in tightening, but
within three months' time, four months' time, we expect much more
relaxed policies from the government," said UBS economist Jonathan
Anderson, according to earlier reports.
Professor Zhou Chunsheng of the Cheung Kong Graduate School of
Business agreed.
"Given domestic and global factors, I think China will go ahead
with tightening moves only in the first half [of 2008]. In the
second half, I expect the tightening policies will be relaxed or
even totally given up," he said.
Fears are mounting in the US that the world’s largest economy
will slide into a recession, prompting the Federal Reserve to
announce a 0.75 percent cut in the federal funds rate on
Tuesday.
That was the biggest cut in two decades and the first between
scheduled meetings of the Federal Open Market Committee since the
2001 terrorist attacks.
According to Citigroup estimates, each one percent drop in the
US economy will shave 1.5 percent off China’s growth, as Americans
are heavy users of Chinese products.
"If US consumption really comes down, that's bad news for us,"
said Zhang Tao, deputy head of the PBOC’s International Department
during the weekend. "That will have a pretty severe impact on our
exports."
In spite of the uncertainties, the country's economy is widely
expected to post its sixth year of double-digit growth in 2008 on
investment and exports.
(Chinadaily.com.cn January 24, 2008)
