The China growth story will again be one of the continuing ‘tales’ for economists, writers, companies, brokers and others to talk up and wonder about in 2007.
Without doubt the giant economy, now the world’s fourth with Gross Domestic Product estimated at $US 2.6 trillion, remains the most influential factor in the Australian economy for investors and for policymakers.
It’s driving the export boom that has seen Western Australia and Queensland leap away from the rest of the country, it’s driving the firm labour market, and driving earnings for the resources sector and property markets in both states.
So it will be comforting to everyone with an interest in the story that it looks as though China finished 2006 with double-digit growth.
China’s top economic planner, Ma Kai, head of the National Development and Reform Commission, said on the agency’s website on Friday that the economy had grown by 10.5 per cent in 2006 “according to initial calculations”.
The short statement was released by Mr Ma ahead of the official announcement of growth figures due on January 25.
Western analysts say the preliminary figure shows an economy still strong but now growing at a slower pace than earlier in the year when growth topped 11 per cent on an annual rate. The 10.5 per cent figure is also less than the 10.7 per cent increase in GDP experienced during the first nine months of 2006, but faster than the 9.9 per cent growth rate for 2005.
The 10.5 per cent is in line with expectations after the Chinese Government tightened the economic screws slightly several times last year, lifting interest rates, increasing reserve requirements to slow investment and altering taxation and other levies to try and change the mix of exports.
But Mr Ma said in the statement seen on Friday that China’s growth rate was “still too fast and the cost is too large”. Perhaps that’s why the reserve requirement for banks was again lifted on January 5 by China’s central bank.
“Government measures were effective in phasing out energy-consuming sectors, bolstering high-tech industries and the service sector and moderating oversupply,” Mr Ma said, adding that the government will “reinforce macroeconomic controls this year” to rein in excess investment.
The Central Bank has also tightened up on land controls to make commercial project approvals harder to come by, made its currency more flexible and issued bonds to soak up the mounting cash from a swelling trade gap which hit record levels last year, much to the joy of supplier countries like Australia and consumers around the world.
China’s Customs Bureau reported last week that the country’s trade surplus swelled to a record $US 177.5 billion in 2006 thanks to those booming exports. That’s more than $A200 billion.
That was 74 per cent higher than the $US 102 billion in 2005.
The central bank’s research unit predicts that China’s economy may grow 9.8 per cent this year but we will have a fuller picture late next week.
