China Growth Story
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A
year after suffering one of its
worst declines in decades,
China's economy has rebounded strongly, recording 8.7 per cent growth
in 2009. The Chinese government's official growth figures for 2009,
have exceeded earlier forecasts: the
economy registered an unexpectedly high 10.7 per cent growth between
October and December, largely on the back of record government spending
on infrastructure projects. China
is now on course to
overtake Japan as the world's
second-largest economy,
though confirmation of that
development will have to wait
until next month, when Japan's
official GDP figures are
released. But
Thursday's data, released
by the National Bureau
of Statistics (NBS), also reaffirmed
what economists say
are the country's two most
pressing challenges: a widening
gap between urban and rural
areas, and a continued
dependence on growth that is
either government-driven or
export-led. Stimulus
plan Economists
here have largely
attributed last year's recovery
to the government's
$586-billion stimulus plan,
which went into force in November
2008. Urban fixed asset
investment rose to 30.5 per
cent last year to $2.8 trillion. In
the past 12 months, the government
has also unveiled measures
to increase domestic
spending, including subsidies
for consumer goods, tax cuts in
rural areas and an overall loosening
of monetary policy. The
10.7 per cent growth for
the last quarter of 2009 was a
marked improvement from the
6.2 per cent seen in the first,
when the export-driven economy
suffered in the wake of collapsing
demand from the West.
But the last year has seen a
steady recovery, with 7.9 per
cent year-on-year growth in
the second quarter and 9.1 per
cent in the third. The
big challenge China faces
now, economists say, is sustaining
this recovery once the
boost given by stimulus spending
subsides. There are also
concerns of bubbles in asset
markets as a result of the loosening
of monetary policy and
subsequent record lending,
which doubled in the past year
to $1.45 trillion. Signs
of bubbles "We
can already see some
signs of bubbles and signs of
tensions in the Chinese economy,
in particular in the housing
sector," said Andrew Burns, an
economist at the World Bank,
this week while releasing the
banks forecasts for 2010, which
has estimated 9 per cent
growth for the country next
year. Ma
Jiantang, director of the
NBS, said the government was
likely to focus more on balanced
growth in the year
ahead. "A key point of macroregulation
this year would be
to balance the tasks of ensuring
stable and relatively fast economic
growth, adjusting economic
structure and regulating
inflation prospects," he said. China
has now met its annual
8 per cent growth, a target
set by the former Premier Zhu
Rongji in 1998, and regarded by
the government as the minimum
level of growth the country
needs to maintain to ensure
social stability. But
Thursday's numbers also
pointed to widening disparities
between urban and rural
areas, a long-standing concern
for the government. The per
capita income of an urban resident
in China has now risen to
3.31 times that of a rural one -
the widest gap in the People's
Republic's 60-year history. In
1978, when economic reforms
and the "opening up" policies
were first initiated, the ratio
stood at 2.56 to one. Mr.
Ma said the government
would look to "moderately
raise" agricultural produce
prices to address the gap in the
coming year. The
government is also
considering
a reform of social welfare
policies to boost incomes
in rural areas. |