MercoPress. South Atlantic News Agency

China noses out UK as world's fourth economy

China's economy spurred by strong export growth and foreign investment expanded 9.9% in 2005, according to data released Wednesday that suggests it may now rank fourth-biggest in the world.

China's gross domestic product totaled 18.23 trillion yuan equivalent to 2.26 trillion US dollars, reported the National Bureau of Statistics said in a statement.

According to recent estimates, that would place it fourth in the world, behind the United States, Japan and Germany, after steamrolling past Britain, France and Italy.

The economy is showing hardly any signs of slowing down despite efforts by Beijing to curb excessive investments in construction and redundant factories that have strained transport networks and supplies of energy and other resources.

Growth in 2004 was 10.1%, 10% in 2003, and Chinese experts forecast a similar expansion for 2006.

However not all international analysts are convinced of the reliability of Chinese economic and some economists questioned if the figures announced Wednesday were understating real growth, given a nearly 30% surge in exports and strong domestic spending.

The 9.9% figure "doesn't quite capture it," said Stephen Green, senior economist for Standard Chartered Bank in Shanghai.

"One could say that 9.9% is a very convenient number; it's not 10%. Ten per cent might scare people, and might create more trade friction with the U.S." According to the most recent figures available and projections for 2005 growth, China's economy is now bigger than those of Britain, France and Italy.

The Statistics Bureau said GDP growth in the first three quarters of 2005 was revised upward from preliminary estimates, to 9.9% in the first quarter, 10.1% in the second and 9.8% in the third, from 9.4%, 9.5% and 9.4%, respectively.

Earlier this month, state media carried reports citing government officials saying 2005 GDP growth was estimated at 9.8%. The Chinese economy has consistently overshot official targets for the past several years.

One of the key factors behind last year's better-than-expected performance was strong investment in construction and factories. Such spending grew 25.7% to 8.9 trillion yuan 1.1 trillion US dollars, and officials warned of problems in keeping it under control.

Retail sales, an increasingly important driver for growth, climbed 12.9% in the last twelve months to 831 billion US dollars reported the Statistics Bureau reported. Chinese officials have stressed the need to reduce reliance on exports, which accounted for more than 30% of GDP growth in 2005, by further boosting domestic spending.

According to Chinese information the consumer price index rose 1.8% last year. Surging costs for raw materials and fuel were countered by falling prices for many industrial goods, reflecting overcapacity in key sectors such as autos and steel.

Excess production is squeezing profit margins, economists have warned and Li Deshui, director of the Statistics Bureau, told reporters the trend could lead to higher bankruptcies.