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China Grows More Than Expected

21/01/10January 21, 2010

The Chinese economy will overcome the international financial crisis much faster than other countries. The latest figures for the fourth quarter and the whole of 2009 show that the gloomy forecasts of most economists a year ago were not accurate. Experts had forecast a maximum of seven percent growth, while the Chinese government had set a target of eight percent. And as the annual report of the National Bureau of Statistics shows, the country has easily beaten its own initial target.

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Experts give credit to the Chinese government’s stimulus package worth four trillion yuan for its growth
Experts give credit to the Chinese government’s stimulus package worth four trillion yuan for its growthImage: AP

China’s economy grew by 10.7 percent in the fourth quarter compared with a year ago while it grew 8.7 per cent for all of 2009. People like Ye Xiaxia are behind such figures. The 24-year-old woman comes from the poverty-hit Guizhou Province and has worked for years in the industrial city of Shenzhen, which is hundreds of miles away from her home. Ye Xiaxia dreams to own a firm one day.

"I would never again work in a factory like my first one," she said. "Now I've seen better things. One goes up only, not down. When, during the financial crisis, we made a mistake, we were punished, like we were not allowed to do overtime. Now the business runs very well. We can constantly work overtime. It is even difficult to get a single day holiday."

Export situation

China’s exports fell in 2009 by 16 percent from their 2008 levels, while imports dropped by 11 percent. But the numbers recovered recently - and the People's Republic has replaced Germany as the largest exporting nation.

Addressing a press conference, the head of the national statistical authority, Ma Jiantang, said: "China's exports were larger than that of Germany. This shows that the Chinese economy has successfully tackled the crisis. But whatever position we take, in terms of per capita income we are not among the top 100 nations in the world. Our population is huge, our economic base is still weak, and we have limited resources. These are our real challenges."

During the conference the Chief Statistician often avoided questions on whether China will overtake the world’s number two economy Japan soon and if it is on track to overtake the US in the next 40 years. He said it was important to first raise the standard of living for 150 million Chinese who live on less than one U.S. dollar a day.

Rising Inflation

On the other hand, concerns are also mounting over rising prices. The chairman of the China Banking Regulatory Commission Liu Mingkang has announced a tighter monetary policy so that inflation does not get out of control. In December, consumer prices rose 1.9 percent.

The government wants to prevent the economy from overheating. Already, many experts have warned against over-production in key industries such as steel and chemicals. Horst Loechel, a financial expert at the China European Business School in Shanghai, sees the overall situation positively though.

"I'm optimistic because the numbers speak for themselves. The key question is: can it help? Yes, it can. But is it permanent? We'll see. It depends largely on whether there is a boost in the domestic demand in China."

And for that people’s income should be increased, he says. The social system must be strengthened; there should be more social security for the people. Then they will save less and spend more.

Author: Astrid Freyeisen/Disha Uppal
Editor: Grahame Lucas