China’s economy posts biggest rise in a decade
THE Chinese economy grew 10.7 percent in 2006 – the biggest increase in 10 years, even as the nation’s financial leaders tried to rein in excessive growth.
Their efforts did appear to have some effect in the last quarter, however, as the blistering pace tailed off slightly with a decline in fixed-asset investment.
Gross domestic product mounted to 20.94 trillion yuan (US$2.7 trillion) in the world’s fourth-largest economy last year, driven by overseas sales, investment and booming domestic consumption, the National Bureau of Statistics said yesterday.
Yearly growth exceeded the 10.4 percent gain in 2005, the bureau said. But after GDP peaked at 11.5 percent in second-quarter 2006, the rate of increase tailed off to 10.4 percent in the last three months.
“A combination of policies to rein in lending and control land use helped prevent the economy from expanding faster,” Xie Fuzhan, chief of the National Bureau of Statistics, said in Beijing.
Among the economy’s major components, the manufacturing sector grew the most last year, surging 12.5 percent to 10.2 trillion yuan. It was followed by the service industry, which advanced 10.3 percent to 8.27 trillion yuan. Agriculture rose five percent to 2.47 trillion yuan.
The country’s macroeconomic controls finally began to gain traction. Fixed-asset spending rose 24 percent to 10.99 trillion yuan overall, slowing from the 29.8 percent in the first half and 25.7 percent in 2005. Investment in the nation’s urban fixed assets climbed to 9.35 trillion yuan, up 24.5 percent from a year earlier, compared with a 27.2 percent on year gain in 2005.
“Investment growth showed visible deceleration, which could be partially attributed to policy tightening in the second half of 2006,” said Liang Hong, an economist in the global investment research division of Goldman Sachs.
“The central bank will likely maintain a tightening bias during the first quarter this year to prevent a rush in bank loan approvals.”
The central bank has stepped up land controls to make project approvals harder to come by, hiked interest rates and raised banks’ reserve requirements to curb credit and cool off an investment boom that has left the country with too much production capacity and idle factories.
Among other economic barometers, inflation last year stood at 1.5 percent, buffeted by a sudden increase of 2.8 percent in December as grain costs surged.
Still, the growth rate in consumer prices was smaller than the 1.8 percent in 2005.
Retail sales jumped 13.7 percent in 2006 to 7.64 trillion yuan, up from the 12.9 percent gain a year earlier as the government cut taxes, raised minimum wages and increased spending to improve education, welfare and health care.
Disposable incomes among the nation’s city dwellers advanced 12.1 percent to 11,759 yuan while those in rural regions climbed 10.2 percent to 3,587 yuan.
Foreign trade jumped 23.8 percent to US$1.76 trillion, yielding a record surplus of US$177.5 billion, up from the US$102 billion in 2005.