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China, world's fourth largest economy

Jonathan Watts

Beijing: China maintained its breakneck momentum last year with a 9.9 per cent growth surge that almost certainly took it past Britain to fourth place in the world gross domestic product rankings.

Despite government efforts to slow the pace of investment and cool an overheated property sector, official statistics released on Friday showed economic expansion in 2005 was only a fraction behind the 10.1 per cent notched up in 2004.

China's GDP is now 18.2 trillion yuan, which — — depending on a slight fluctuation in exchange rates — surpasses estimates for Britain and France last year. The U.S., Japan and Germany are considerably bigger, but China is catching up fast. While other leading economies would be happy with 4 per cent growth this year, China is expected to more than double that.

Despite the spectacular numbers, analysts believe the Government has — if anything — underestimated output. Statistics in this vast, largely unregulated and often secretive country are notoriously unreliable. Last month, officials announced the economy was 16.8 per cent bigger than previously thought because of hidden consumption and unreported income.

As well as dubious measurements, Beijing's ability to control the pace of growth is in doubt. For the past three years, expansion has considerably overshot official targets. Exports — which are more carefully monitored than domestic business activity — jumped by 30 per cent in 2005, despite worsening trade frictions with the U.S. and Europe.

Investment in construction and factories leapt 25 per cent, raising fresh concerns of overheating. The falling price of cars and steel suggest there is already over-capacity in these sectors. The majority of China's 1.3 billion population are poor by western standards. According to the National Bureau of Statistics, 26 years of near double-digit growth have taken the average income to $1,700 making the country richer than Morocco, but far behind Europe, Japan and the United States. —

© Guardian Newspapers Limited 2004

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