China back on the road as growth tops 10%

Published on Wednesday 19 January 2011 21:41

China's economy grew at a blockbuster 10.3 per cent last year, figures yesterday revealed, while inflation cooled as food price pressures eased.

GDP expansion picked up in the fourth quarter, to 9.8 per cent from 9.6 per cent in the previous three months, as the world's second-largest economy gained momentum despite moves to curb a torrent of investment and get a grip on inflation.

Yesterday's official statistics showed the rate of inflation was 4.6 per cent in December compared with a 28-month high of 5.1 per cent the month before. That put inflation for 2010 as a whole at 3.3 per cent - higher than some economists had been forecasting. The news rattled investors who fear further moves to dampen credit.

Peng Yunliang, an analyst at Shanghai Securities, said: "The only slight decline in inflation in December shows just how grim the situation is for cooling inflation. In my view, inflation will remain a headache for the government in 2011."

Those pressures may force Beijing to slow the economy more aggressively, potentially crimping growth in a world increasingly dependent on Chinese demand.

Ma Jianting, commissioner of the National Bureau of Statistics, reiterated an earlier government line that inflation was being fuelled by overly loose monetary policy in developed countries.

But he acknowledged that increased costs for wages, land and other factors in China were also pushing prices higher.

Ma said Beijing had achieved "remarkable results" in its effort to cool inflation, adding: "But the price trends in 2011 cannot be taken lightly."

Many economists believe China's economy remains dangerously dependent on investment in property and construction. Such spending shot up 23.8 per cent in 2010, compared to 2009.

IHS analyst Alistair Thornton said: "Should rampant liquidity drive inflationary pressure still higher, the policy dilemma facing the government will merely intensify."