China’s GDP grows at 11.4pc in 2007

Published January 25, 2008

BEIJING, Jan 24: China’s economy grew at a blistering 11.4pc pace in 2007, the fastest in 13 years, the government said on Thursday, warning more needed to be done to address the rising threat of inflation.

The Asian juggernaut saw a fifth consecutive year of double-digit growth, with inflation at an 11-year high, the National Bureau of Statistics said, admitting that overheating remained a threat.

“The risk of the economy shifting from rapid (growth) to overheating still exists,” Xie Fuzhan, the bureau's head, told a briefing in Beijing.

China's economy last year totalled 24.7 trillion yuan ($3.4 trillion) according to year-end exchange rates.

Growth in the fourth quarter of 2007 was 11.2pc, a slight moderation from 11.5pc in the third quarter, the bureau added.

Growth in Asia’s second-largest economy was boosted by record exports and massive spending on infrastructure.

The bureau confirmed previously released statistics which showed the trade surplus last year soared 47.7pc to $262.2bn.

Investment in fixed assets, covering everything from bridges to new equipment in factories, rose 24.8 per cent in 2007, the bureau said.

The rapid expansion came despite government efforts to cool the economy, including six interest rate hikes in 2007, amid concerns that inflation was rising to uncomfortable levels.

The statistics bureau said inflation last year had struck 4.8 per cent, the steepest increase in 11 years. In December, the consumer price index was up 6.5pc.

“A sharp increase in a range of daily necessities is causing deep pain to the vast poor majorities of rural population and a large percentage of China’s low-income urban population,” Sumei Tang, an economist with ratings agency Moody's said in a report on the figures.

“Failure to deal with inflation could incite social and political tensions.”

Inflation has been fuelled mainly by a spike in food prices. The bureau said prices of meat, poultry and related products soared 31.7pc in 2007.

However, imported inflation was another factor, Xie said, citing high oil prices.

“We need a number of measures to control price rises, but it will take time for these measures to show their effectiveness,” said Xie.

Economists said China was constrained by what it could do, as a further hike in interest rates would widen the spread with US rates, which were sharply cut earlier in the week.

The spread could trigger further capital inflows to China, worsening inflation.—AFP

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