Open

Coming up

Don't miss

Replay


LATEST SHOWS

DEBATE

Gaza: A Truce At All Costs?

Read more

AFRICA NEWS

Central African Republic: Brazzaville ceasefire talks deliver fragile deal

Read more

FOCUS

Sluggish tourist season in Crimea

Read more

ENCORE!

Bartabas : Mixing Christ with Spanish music and dancing horses

Read more

IN THE PAPERS

Shifts in the propaganda war waged between Israelis and Palestinians

Read more

IN THE PAPERS

French MPs face quandary in pro-Palestinian rallies

Read more

THE INTERVIEW

Yezid Sayigh, Senior Associate at the Carnegie Middle East Center in Beirut

Read more

#TECH 24

Mind the Gender Gap : getting more women into the tech sector

Read more

INSIDE THE AMERICAS

Bolivian children: heading to work aged 10

Read more

  • Live: France says missing Algerian plane 'probably crashed'

    Read more

  • 51 French nationals aboard missing Algerian plane

    Read more

  • Deadly Israeli strike on UN shelter in Gaza Strip

    Read more

  • Pope meets with Sudanese Christian woman sentenced to death for apostasy

    Read more

  • Algerian jet vanishes: 'We should eliminate the missile hypothesis'

    Read more

  • Italy’s Nibali cruises to easy victory in 18th stage of Tour de France

    Read more

  • Iraqi parliament elects moderate Kurd as president

    Read more

  • US, European aviation agencies lift travel restrictions to Tel Aviv

    Read more

  • No end to fighting until Israel ends Gaza blockade, Hamas says

    Read more

  • Two foreign women shot dead in western Afghanistan

    Read more

  • At least 60 killed in attack on prison convoy near Baghdad

    Read more

  • Cycling is ‘winning the war on doping,’ says expert

    Read more

  • Ceasefire agreed for Central African Republic

    Read more

  • Can Jew-kissing-Arab selfie give peace a viral chance?

    Read more

  • Botched Arizona execution takes nearly two hours

    Read more

Business

Jump in growth raises stakes for economic leadership

Video by Luke BROWN , Aude Soufi

Text by Siva SITHRAPUTHRAN

Latest update : 2010-01-21

China's economic growth continues to be the envy of the world but the steep gains seen by the Asian giant also raises wider questions on sustainability.

 

China’s startling economic growth rate in 2009 while the rest of the world struggled just to stay in the black was no mean feat, but the sharp increase also raises key challenges for the economic leadership of the Asian giant.   
 
The Chinese economy, currently the third biggest in the world, grew on the back of helpful monetary and fiscal policies. Alongside the gain, however, inflation has ticked up in worrying fashion, in turn alerting the world to the possibility of overheating.
 
“The government now faces the challenge to prevent speculative bubbles in the asset markets and a rapid rise of inflation without jeopardising economic growth” , You-Na Park, analyst at Frankfurt based Commerzbank says.
 
China's economy expanded by 8.7 percent in 2009 with the last three months of the year proving the strongest. Fourth quarter growth rate came in at 10.7 percent, the fastest in two years. Inflation, meanwhile, rose 1.9 percent in December from the same period a year ago compared with 0.6 percent in November.
 
Going by comments from a key official, China is already on the case to rein in rising prices and lending.
 
"We need to prevent the overly fast increases in prices and keep a close eye on the trend in prices," Ma Jiantang, commissioner of the National Bureau of Statistics, was quoted as saying.
 
The rhetoric follows action. The country is pushing to limit runaway bank lending levels. At the same time, banks have been told to fortify provisions made for bad debt. 
 
The crucial question is whether China is doing enough to ward of a spiral of rising prices. Observers from around the world are worried and talk of a bubble building up has been rife.
 
“Looking ahead, we expect interest rates to rise in China. However, we believe concerns about an asset bubble are overdone,” according to William Fong, Hong Kong based fund manager at Baring Asset Management. 
 
He cites declining total amounts of bad loans in 2009 and argues that bank lending has been used to finance the right things.
 
“New loans made in 2009 are mostly being used to fund Government and infrastructure projects, as well as to finance industrial capital spending. The suggestion that these loans are mainly being used for speculation in the equity and property markets is erroneous, in our opinion,” he says.
 
China’s continued strong economic performance also puts its currency in the spotlight. Complaints about the reminbi’s weakness have been both widespread and constant. The weak reminbi gives Chinese exports a competitive edge.
 
“We maintain that China should be considering a greater one-off revaluation of the  renminbi  once  confidence  over  the sustainability of global growth
is assured,” says Derek Halpenny European Head of Global Currency Research at Bank of Tokyo-Mitsubishi UFJ in London.
 
He favours a “larger one-off move” allowing the reminbi to appreciate later in the year.

 

Date created : 2010-01-21

  • CHINA

    Economic boom stokes fears of inflation

    Read more

  • AUTO INDUSTRY

    China overtakes US as world's largest car market

    Read more

COMMENT(S)