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China: GDP growth the highest in 14 years

The economy expanded by 11.4% year on year in 2007 - at the fastest clip since 1994 and the fifth consecutive year it grew by more than 10%, the National Bureau of Statistics (NBS) said yesterday.

The ups and downs each year have also been within 1 percentage point in the past five years, which is an “extraordinary” feat, NBS chief Xie Fuzhan told a press conference. The economy will “hopefully maintain stable growth this year and after, but faces challenges,” Xie said. “I’m optimistic about growth this year,” he said. “(Even) if the growth dropped moderately, it will be what we want to see.”

China has adopted a strategy of balancing economic expansion with energy and resource consumption. A moderate slowdown in growth will augur well for the environment and the country’s drive to seek a more efficient growth mode. Some economists argue that as the tightening policies of recent years start to bite and the US demand for imports decreases, the Chinese economy may be starting to see a slowdown. The new labor law, which took effect from this year, will also increase corporate costs as it makes it more difficult for employers to lay off workers. “The law coincides with the onset of economic woes in the US and global economies and, coupled with China’s renewed tightening this year, will seriously affect the economy,” Chen Xingdong, chief economist of BNP Paribas Peregrine Securities, told China Daily.

But Zhuang Jian, senior economist with the Asian Development Bank (ADB) in Beijing, said the fundamentals for economic growth have not changed. China is right in the midst of its industrialization and urbanization process and, therefore, economic growth would not drop significantly, he told China Daily. “And China has been increasing inputs in R&D and education, which will provide a sustained driving force for growth.” Meanwhile, growth in the consumer price index (CPI), a key gauge of inflation, dropped slightly to 6.5% in December from the 11-year peak of 6.9% a month earlier. CPI growth for the whole of 2007 was 4.8%, compared to 1.5% in 2006. The central bank had set a target of 3%.

“The price rises were caused by a number of factors,” Xie said. They include rising oil and grain prices in the international markets as well as ample liquidity and rising costs of domestic pig breeding. The government has taken a series of measures, such as increasing supply and temporarily intervening in the market, to stabilize prices. “But it will take some time for them to take hold,” Xie said. He said the economy still faces the risk of entrenched inflation. Some uncertainties may contribute to inflation risks this year, Zhuang said. They include the unpredictable price trends of international oil and resource products and Chinese policymakers’ ability to put investment growth on hold, he said.  (China Daily)