The Economy

China's Economy Grew 10.3% in 2010

Jan. 20, 2011

Output from the country's millions of factories and workshops rose 15.7% for all of 2010.

Marking the fastest annual pace since the onset of the global crisis, China said on Jan. 20 that its economy grew 10.3% in 2010.

Gross domestic product rose by 9.8% in the fourth quarter, accelerating from the previous quarter and exceeding analysts' expectations, cementing China's position as the world's second-largest economy.

Output from the country's millions of factories and workshops rose 15.7% for all of 2010 as government spending on infrastructure in urban areas rose 24.5% over the 12 months.

Retail sales rose 18.4% in 2010.

While consumer inflation in December eased from the previous month, it remained stubbornly high at 4.6% despite Beijing's efforts to rein in prices, spooking investors in the region who fear further tightening measures.

Analysts said the pick-up in growth in the fourth quarter -- partly driven by stronger exports -- and the still-high inflation in December supported the case for further interest rate hikes and bank lending curbs. "Policymakers will not claim a big victory on the fall of CPI inflation to below 5% in December," said Lu Ting, an economist at Bank of America-Merrill Lynch.

"Currently the economy is in a critical period of transforming from recovery to stable growth," said Ma Jiantang, Commissioner of the National Bureau of Statistics. He explained that China would boost efforts to transform its "economic growth pattern" -- echoing comments made on Jan. 19 in Washington by President Hu, who pledged to boost domestic demand and spending.

The country's consumer price index, the main gauge of inflation, rose 3.3% for all of 2010 -- exceeding the government's full-year target of three percent as food costs soared. The December figure was slightly better than the 5.1% increase in November, which was the fastest pace in more than two years.

For IHS Global Insight analyst Alistair Thornton, "a new wave of credit expansion is driving inflationary pressure, in both consumer prices and asset markets, with a re-acceleration in construction and fixed investment."