China says first country 'to recover from global slump'

A government spokesman declared China the first economy to recover from global slump.

China says first country 'to recover from global slump'

China easily beat its 2009 growth target after a blistering fourth quarter performance and put it on course to overtake Japan to become the world's second-largest economy.

China shook off the global crisis as growth surged to 10.7 percent in the final quarter of 2009 but inflation picked up, adding to pressure on Beijing to cool rising prices without disrupting the recovery.

Quarterly growth beat forecasts and boosted the 2009 expansion in the world's third-largest economy to 8.7 percent, up from a low of 6.1 percent in the first quarter.

A government spokesman declared China the first economy to recover from global slump and indicated it is shifting focus to cooling inflation that rose sharply in the fourth quarter, fueled by massive bank lending in support of a 4 trillion yuan ($586 billion) stimulus program.

"We need to prevent overly fast price increases," said Ma Jiantong, commissioner of the National Bureau of Statistics, at a news conference.

That has instilled confidence in markets and consumers and paid off with growth becoming more robust and broad-based.

"Confidence is the spark setting fire to the plain," Jiantang said.

The data prompted JPMorgan and RBS economists to lift their 2010 growth forecasts to 10 percent from 9.7 percent and 9.5 percent respectively, but expectations of policy tightening outweighed optimism about China's contribution to global recovery.

The U.S. dollar briefly rose to its highest in four months after the Chinese figures, as investors cut their exposure on riskier bets. Shares in most of Asia-Pacific eased, though stocks in Shanghai were up 0.3 percent.

The fourth-quarter flourish was flattered by a low base of comparison in the same period a year earlier, when China's export-orientated economy was dragged down by the global financial crisis, costing more than 20 million migrant workers their jobs.

But the double-digit growth is also testimony to the government's rapid response to the downturn.

A 4 trillion yuan ($585 billion) fiscal stimulus package was complemented by an unprecedented surge in lending by the nation's predominantly state-owned banks, ensuring that China was the first major economy to recover decisively from the credit crunch.

Inflation

Indeed, banks have been lending so freely of late that policymakers have turned their attention to nipping inflation in the bud.

The statistics bureau, which released the GDP figures, also reported that consumer prices rose 1.9 percent in the year to December, a marked acceleration from November's reading of 0.6 percent.

Alarmed by a new burst of credit at the start of January, the central bank last week increased the proportion of deposits that banks must hold in reserve, rather than lending out, and followed through this week by ordering some of them to sharply curtail lending for the rest of the month.

The central bank has also been lifting yields on its bills over the past few weeks and on Thursday nudged up the yield on three-month bills for the second time this year.

China has taken a slew of steps to spur spending, including subsidies for rural buyers of domestic appliances and tax breaks on fuel-efficient cars, a measure that helped China to overtake the United States in 2009 as the world's largest car market.

Retail sales grew 17.5 percent in the year to December, accelerating from 15.8 percent in November and compared with forecasts of a 16.4 percent rise.

Industrial production growth slowed to 18.5 percent from 19.2 percent, undercutting market forecasts of a 20.0 percent increase.

Growth of 8.7 percent in 2009 fell short of the previous year's rate of 9.6 percent, but economists polled by Reuters expect a rebound this year to around 9.5 percent.

That would be enough for China to relegate Japan to number three in the world economic rankings. Goldman Sachs expects China to eclipse the United States as the biggest economy in the world by 2027.


Agencies

Last Mod: 21 Ocak 2010, 15:34
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