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China back to double-digit growth

The Chinese economy grew by 10.7% year-on-year in the final quarter of 2009. This was the fastest growth for two years and meant that there was a growth in output for 2009 as a whole of 8.7%. The official growth target had been 8.0%.


Gross Domestic Product totalled £3,020 billion in 2009 which put China’s output just below the level expected in Japan. This means that it is very likely that during 2010 China will overtake Japan to become the world’s second largest economy. In fact, Goldman Sachs, the US investment bank, expects China to overtake the US in terms of GDP by about 2027.


Industrial production rose by 18.5% in the fourth quarter of 2009 in China and fixed capital investment rose by an incredible 30.5%. Ma Jiantang, commissioner of the National Bureau of Statistics told a press conference that: “China has become the first, on the whole, to achieve recovery and stabilization in its economy.”


However, not everything in the economy is entirely rosy. China has just seen a rapid rise in inflation levels. Consumer price inflation rose from 0.6% in November year-on-year, to 1.9% in December. Food prices were responsible for 90% of the December increase, largely due to the extreme cold weather experienced in Northern China.

China may allow the Yuan to appreciate, to help reduce import prices and offset inflation.

China may allow the Yuan to appreciate, to help reduce import prices and offset inflation.


Will inflation get out of control? The Chinese government has operated a very loose monetary policy and there has been a huge stimulation of bank credit. In fact, the M1 measure of the money supply rose by a staggering amount of nearly 35% in 2009.


But, there is still a great deal of overcapacity in the economy, and observers believe that this will help to contain inflation, with most forecasts anticipating an inflation level of about 3.0% this year. It is also expected that the government may start to create an appreciation in the value of the Yuan. This would help to reduce import prices on commodities and other goods but would obviously make exports more expensive. However, given the fact that exports grew by 17.7% in December compared with the same month in 2008, this may not be a huge problem.

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Posted in China

1 Comment on China back to double-digit growth

  1. You put too much stock in socialist economies. There will be much more hardship soon with a looming Chinese collapse bigger than the Soviet Union’s.

    CrisisMaven | April 8, 2010 at 1:11 pm () ()