China GDP on a roll
China’s economy recorded a whopping 9.4 per cent growth in the last quarter, leaving the anaemic economies of the West far behind.
Growth exceeded analysts’ expectations as the Chinese juggernaut was bolstered by strong exports and high public spending. Real gross domestic product (GDP) grew by 9.4 per cent on last year on the back of a 9.5 per cent increase in the previous quarter.
Total GDP for the nine months from January to September grew to total 10.627trn yuan (£738bn). Most of the growth was in exports and structural investment, which helped industrial output grow by 16.3 per cent.
Investment in railway construction surged by 41 per cent and spending on coal mines went up by an incredibly 77 per cent according to China’s Bureau of National Statistics.
The Chinese economy accounted for 10 per cent of global growth last year and continues to soar ahead despite expectations of a slowdown.
The government has tried to put the brakes on the booming economy by putting interest rates up and restricting credit levels. It is also trying to limit investment in industries such as steel, cement and aluminium.
However, analysts warned that it was too much too soon. Global Insight’s Claire Innes said: “Heedless expansion of state-owned enterprise, fuelled by the funnelling of credit through state banks is exacerbating over-supply in the economy, while the inefficient allocation of resources constricts the growth of productive private sector demand.”
Bureau spokesman Zheng Jingping said that current investment patterns were “oversized and irrational”. The government has tried to stimulate domestic consumption, but is hindered by the huge divide between the rich cities of the east like Shanghai and the rural hinterland of the west.
The massive 31.3 per cent increase in exports is likely to reignite controversy over the valuation of the yuan.
The currency has been pegged to the dollar at 8.23 for most of the past decade. In July the peg was relaxed following pressure from America, but the strength of China’s trade balance is likely to kick off the row again.
When he visited China recently, the US Treasury Secretary John Snow called for the yuan to float higher and threatened protectionist pressures from Congress if the Chinese did not comply.
