China s economy expanded faster than expected at the end of last year adding to concerns about overheating and prompting expectations of further monetary tightening in the coming months.
Fourth quarter GDP growth rose to 9.8 per cent, beating expectations, with GDP growth for the year at 10.3 per cent, up 1.1 percentage points from 2009.
The figures also confirm that China surpassed Japan for the first time last year to become the world s second-largest economy after the US.
Annual consumer price inflation, a key headache for policy makers, fell back to 4.6 per cent in December, from a 28-month high of 5.1 per cent in November, but analysts said inflationary pressures remain and prices are expected to rebound in the first quarter, complicating the government s efforts to cool the economy without triggering a sharp slowdown.
For the whole year, consumer prices rose 3.3 percent, above the target of 3 per cent Beijing set at the start of 2010. Food prices, the main driver of inflation, were much higher, up 7.2 per cent for the year.
Purchaser s prices for raw materials were also up nearly ten per cent in 2010.
Ma Jiantang, commissioner for the National Bureau of Statistics, announced the data on Thursday in Beijing and vowed the government would succeed in controlling inflation in 2011.
We have full confidence that we will control the price level in 2011, Mr Ma said, adding that China s seven consecutive years of good harvests meant food prices would be kept under control. The government has said it will adopt a prudent monetary policy this year.
Mr Ma said inflationary pressures were real, citing quantitative easing in developed countries, and the rising costs of land and labour, as contributing to an inflationary environment.
Qing Wang, an economist with Morgan Stanley, said: Monetary policy will be tightened and the tightening will be front loaded. He attributed the growth spurt to the mini-stimulus measures enacted by Beijing in the summer of last year, as well as growth in industrial production in the fourth quarter as energy efficiency measures were eased.
[The faster growth was] a result of the combination of strong demand which is boosted by loose monetary policy as well as an improvement in external demand, said Yu Song, China economist for Goldman Sachs.
In one controversial estimate, China may even have overtaken the US last year in terms of purchasing power, according to Arvind Subramanian, senior fellow at the Peterson Institute for International Economics in Washington.
He estimates China s economy grew to $14,800bn last year, compared with $14,600bn in the US, if the different costs of living in each country are taken into account. However, his estimate has been disputed by many other economists. In nominal terms China s total GDP was still only around $6,000bn in 2010.
