 Journalists take photos of a new high- speed inter-city train that connects Shanghai and Hangzhou prior to the first train's launch in Shanghai, China, in this Oct. 26, 2010 photo. China’s gross domestic product totaled 39.8 trillion yuan ($6.04 trillion) in 2010. Bloomberg photo |
China’s economic growth accelerated to 9.8 percent in the fourth quarter as industrial production and retail sales picked up, driving stocks lower on speculation that an interest-rate increase may be imminent.
The expansion compared with a 9.6 percent annual gain in the previous three months, a statistics bureau report showed Thursday. Consumer-price inflation eased to 4.6 percent in December. Citigroup and Credit Suisse say inflation may peak at as much as 6 percent in the first half.
“If the economy keeps growing at the current pace, inflation will remain alarming,” said Liu Li-Gang, a Hong Kong-based economist at Australia and New Zealand Banking Group. Beside raising lenders’ reserve requirements, the central bank should boost benchmark rates, he said.
China may also allow more gains in the yuan to contain consumer prices and ease trade tensions, a topic on the agenda of President Hu Jintao’s meetings in the U.S. this week. In Tokyo, Japanese government minister Kaoru Yosano said his country was probably overtaken as the second-largest economy last year, after Thursday’s report showed China’s gross domestic product, or GDP, totaled 39.8 trillion yuan ($6.04 trillion).
The Shanghai Composite Index tumbled 2.9 percent to close at a four-month low. The index has fallen 15 percent in the past year on concern at the effects of monetary tightening. Non-deliverable yuan forwards traded at 6.4780, indicating that the currency may appreciate about 1.7 percent against the dollar in the next 12 months.
Fastest growth in three years
China’s economy expanded 10.3 percent in 2010, the fastest pace in three years. That compared with growth of 9.2 percent in 2009. The nation’s standing as the No. 2 economy may be confirmed Feb. 14 when Japan reports GDP data for the fourth quarter.
Bank of America-Merrill Lynch estimated that, using average full-year exchange rates, China’s GDP was about $380 billion bigger in 2010 than Japan’s.
December’s inflation compared with November’s 5.1 percent annual pace, which was the fastest in more than two years. The rate slowed largely because of a higher year-earlier base for comparison and may “spike” in January ahead of a Chinese New Year holiday, Merrill economist Lu Ting said.
For 2010 as a whole, consumer prices rose 3.3 percent, breaching a government target of 3 percent.
A tighter monetary policy, abundant grain supplies and industrial overcapacity will help to restrain price increases, statistics bureau head Ma Jiantang told reporters at a briefing in Beijing. At the same time, China can’t be “relaxed” about inflation as labor and commodity costs rise, he said.
Urban fixed-asset investment rose 24.5 percent in 2010 from a year earlier. Retail sales grew at an annual 19.1 percent in December, partly boosted by inflation, and industrial production rose 13.5 percent, the statistics bureau said. Producer prices jumped 5.9 percent.
Huge leap forward
In nominal terms, the nation’s GDP is more than 100 times bigger than in 1978, when Communist Party leader Deng Xiaoping began rolling out free-market policies. While China outstripped Germany in 2007 and the U.K. and France in 2005, the economy remains less than half as big as that of the U.S.
Premier Wen Jiabao pledged this week to prevent “abnormal” loan growth amid concern that resurgent lending may add to excess money in the financial system, fueling asset bubbles and inflation.
Policy makers’ commitment to taming inflation means they risk “overshooting” and causing a slowdown that hampers the global recovery, Allen Sinai, president of Decision Economics in New York, said in an interview.
The central bank will increase the key one-year lending rate to 6.81 percent from 5.81 percent this year and let the yuan gain about 6 percent against the dollar, Nomura Holdings estimated this week.
The Chinese currency traded at 6.5884 per dollar, after U.S. President Barack Obama said it remains undervalued. “There has been movement, but it has not been fast enough,” Obama said Wednesday.
The expansion compared with a 9.6 percent annual gain in the previous three months, a statistics bureau report showed Thursday. Consumer-price inflation eased to 4.6 percent in December. Citigroup and Credit Suisse say inflation may peak at as much as 6 percent in the first half.
“If the economy keeps growing at the current pace, inflation will remain alarming,” said Liu Li-Gang, a Hong Kong-based economist at Australia and New Zealand Banking Group. Beside raising lenders’ reserve requirements, the central bank should boost benchmark rates, he said.
China may also allow more gains in the yuan to contain consumer prices and ease trade tensions, a topic on the agenda of President Hu Jintao’s meetings in the U.S. this week. In Tokyo, Japanese government minister Kaoru Yosano said his country was probably overtaken as the second-largest economy last year, after Thursday’s report showed China’s gross domestic product, or GDP, totaled 39.8 trillion yuan ($6.04 trillion).
The Shanghai Composite Index tumbled 2.9 percent to close at a four-month low. The index has fallen 15 percent in the past year on concern at the effects of monetary tightening. Non-deliverable yuan forwards traded at 6.4780, indicating that the currency may appreciate about 1.7 percent against the dollar in the next 12 months.
Fastest growth in three years
China’s economy expanded 10.3 percent in 2010, the fastest pace in three years. That compared with growth of 9.2 percent in 2009. The nation’s standing as the No. 2 economy may be confirmed Feb. 14 when Japan reports GDP data for the fourth quarter.
Bank of America-Merrill Lynch estimated that, using average full-year exchange rates, China’s GDP was about $380 billion bigger in 2010 than Japan’s.
December’s inflation compared with November’s 5.1 percent annual pace, which was the fastest in more than two years. The rate slowed largely because of a higher year-earlier base for comparison and may “spike” in January ahead of a Chinese New Year holiday, Merrill economist Lu Ting said.
For 2010 as a whole, consumer prices rose 3.3 percent, breaching a government target of 3 percent.
A tighter monetary policy, abundant grain supplies and industrial overcapacity will help to restrain price increases, statistics bureau head Ma Jiantang told reporters at a briefing in Beijing. At the same time, China can’t be “relaxed” about inflation as labor and commodity costs rise, he said.
Urban fixed-asset investment rose 24.5 percent in 2010 from a year earlier. Retail sales grew at an annual 19.1 percent in December, partly boosted by inflation, and industrial production rose 13.5 percent, the statistics bureau said. Producer prices jumped 5.9 percent.
Huge leap forward
In nominal terms, the nation’s GDP is more than 100 times bigger than in 1978, when Communist Party leader Deng Xiaoping began rolling out free-market policies. While China outstripped Germany in 2007 and the U.K. and France in 2005, the economy remains less than half as big as that of the U.S.
Premier Wen Jiabao pledged this week to prevent “abnormal” loan growth amid concern that resurgent lending may add to excess money in the financial system, fueling asset bubbles and inflation.
Policy makers’ commitment to taming inflation means they risk “overshooting” and causing a slowdown that hampers the global recovery, Allen Sinai, president of Decision Economics in New York, said in an interview.
The central bank will increase the key one-year lending rate to 6.81 percent from 5.81 percent this year and let the yuan gain about 6 percent against the dollar, Nomura Holdings estimated this week.
The Chinese currency traded at 6.5884 per dollar, after U.S. President Barack Obama said it remains undervalued. “There has been movement, but it has not been fast enough,” Obama said Wednesday.
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