China Says Its Economy Essay

877 words - 4 pages

In the last 30 years, no major economy in the world has grown at the speed of China’s, and no other country has been able to do it year after year, for over a decade.

And on Thursday China did it again, saying that its economy grew by a whopping 10.7 percent in 2006, the fastest pace in more than a decade, with only modest signs of inflation.

“This is pretty impressive,” said Shen Minggao, an economist in Beijing for Citigroup. “I’d say 2006 was about the best year in a decade — fast growth and low inflation.”

The 10.7 percent growth recorded in 2006 was the fourth consecutive year of double-digit economic growth and China’s strongest year since 1995, when the economy grew 10.9 ...view middle of the document...

Beijing is also under pressure to allow the Chinese currency, the yuan or renminbi, to appreciate more quickly against the dollar, in the hope of easing the country’s trade surplus with the United States.

The yuan has strengthened somewhat against the dollar, climbing to about 7.8 yuan to the dollar, from 8.26 yuan in 2005.

Economists have warned that if the yuan does not continue to appreciate against the dollar and other major currencies, China could face protectionist action, which could pose an even more serious threat to economic growth.

These are the trials of a country where everything is red hot — foreign investment, trade, real estate and stock prices, which climbed more than 130 percent last year and have soared even higher in the opening weeks of this year.

Although inflation, driven largely by higher food prices, jumped to 2.8 percent in December, from 1.9 percent in November, analysts say they are not overly concerned about inflationary pressure. The core inflation number, excluding volatile items like food, was modest, with inflation rising just 1.5 percent in 2006.

But other economists say that accelerated growth often leads to higher prices, and that there could be a lag before stronger signs of inflationary pressure are seen.

Among the government’s chief worries has been overinvestment in certain sectors of the economy, like real estate. Stock prices are another concern. After dipping to their lowest level in six years in mid-2005, stock prices in Shanghai have nearly tripled in a record-breaking run.

The central bank said that last...

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