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China's economy grew 10.3% in 2010 | China's economy grew 10.3% in 2010 |
(about 6 hours later) | |
China's gross domestic product (GDP) grew a faster-than-expected 10.3% in 2010, official statistics show. | China's gross domestic product (GDP) grew a faster-than-expected 10.3% in 2010, official statistics show. |
Growth figures for the fourth quarter also defied expectations of a slowdown, rising to 9.8% from 9.6%. | |
But inflation eased to 4.6% in December from a 28-month high of 5.1% the month before, as food price pressures waned. Inflation for 2010 as a whole was 3.3%. | |
Aware of the unrest sparked by past periods of high inflation, China's leaders make curbing it a priority. | Aware of the unrest sparked by past periods of high inflation, China's leaders make curbing it a priority. |
Rising prices | |
They have raised interest rates twice in the past four months and raised banks' required reserves in a bid to control food and housing costs. | They have raised interest rates twice in the past four months and raised banks' required reserves in a bid to control food and housing costs. |
Analysts say the apparent easing of inflation reflects a relatively high base figure recorded in December the year before, and that the government needs to do more. | |
The December inflation figure was higher than markets had anticipated, as was fourth quarter growth. | |
The huge sums of money pumped into the world's second largest economy by state-run banks are hindering moves to bring inflation under control, they add. | The huge sums of money pumped into the world's second largest economy by state-run banks are hindering moves to bring inflation under control, they add. |
However, Ma Jianting, head of the National Bureau of Statistics, reiterated the Communist Party line that inflation was being fuelled by overly loose monetary policy in developed countries. | |
Dongming Xie, of OCBC Bank in Singapore, told the Reuters news agency: "Growth momentum remains strong. However, inflation is the key focus of the market. It will be a challenging year for China to battle inflation. | |
"December inflation is higher than our expectations. Food prices continued to go up in the first half of this month due to seasonal demand," he added. | |
Tightening measures | |
Following the data release, short term market interest rates shot up almost 2%, while share prices on the Shanghai stock exchange fell 3%. | |
Market participants fear that the strong data will increase the authorities' determination to cool the economy in the near future. | |
The People's Bank of China has so far shied away from raising interest rates quickly - despite surging inflation - because of the pain it would cause to existing lenders. | |
Instead, the central bank has relied mainly on raising banks' reserve requirements in order to curb the volume of lending. | |
The central bank did so for the seventh time on Thursday, a day after it set a tough new quarterly lending quota for the main state banks. | |
But this approach did not stop banks overshooting the official 7.5bn yuan lending cap for 2010 by an estimated 45%. | |
A rise in the state-controlled exchange rate may also be another tool to slow down the economy, although analysts only expect Beijing to allow a 5% appreciation this year. | |
The yuan has strengthened 0.8% against the dollar in recent days, although this may be politically motivated to coincide with President Hu Jintao's visit to the US. | |
Rebalancing act | |
The inflation and growth data were officially published by the National Bureau of Statistics on Thursday, although they had been leaked a day early by Hong Kong-based Phoenix television. | |
Investment in construction and other fixed assets rose 23.8% in 2010, with the biggest state-controlled commercial lenders giving out $36.4bn in new loans, much of it for property development. | Investment in construction and other fixed assets rose 23.8% in 2010, with the biggest state-controlled commercial lenders giving out $36.4bn in new loans, much of it for property development. |
Sales of land-use rights to developers increased by 70% last year, helping property prices rise 6.4% compared with 2009. | Sales of land-use rights to developers increased by 70% last year, helping property prices rise 6.4% compared with 2009. |
Industrial output meanwhile rose strongly in 2010, suggesting there is growing demand again for Chinese-made goods. | Industrial output meanwhile rose strongly in 2010, suggesting there is growing demand again for Chinese-made goods. |
In a more encouraging sign, retail sales rose by an inflation-adjusted 14.8% during the year. | |
Consumption in China absorbs a worryingly low proportion of economic output, with a much bigger share used up in investment. | |
Economists say that in order for the economy to rebalance smoothly, consumption will need to grow much more quickly than the overall growth level for many years. |