Fresh numbers from the National Bureau of Statistics show that China grew 10.7% year-on-year in the fourth quarter of 2009, accelerating from a revised 9.1% year-on-year growth rate in the third quarter. For 2009, the economy expanded 8.7% year-on-year, down from a 9.6% growth rate in 2008 and a 13% growth rate in 2007.
China's performance makes it the world's second-largest economy, relegating Japan to third spot.
For 2009, the China's primary industry grew 4.2%. The secondary industry grew 9.5% and the tertiary industry grew 8.9%.
The bureau also reports that fixed asset investment grew 30.5% in 2009, and retail sales increased 15.5%. For December, producer prices rose 1.7% year-on-year and consumer prices increased 1.9% year-on-year, both higher than the month before. Retail sales increased 17.5% year-on-year and industrial production rose 18.5% year-on-year, lower than in November.
Alaistair Chan, associate economist at Moody’s Economy.com, says the fourth quarter GDP data shows economic output remained strong, as expected. "Given the weak numbers from a year ago growth in year-on-year terms was expected to be high, as it should be again in the first quarter of 2010," notes Chan, adding that the acceleration in the fourth quarter compared to the third quarter of 2009 also shows significant momentum has built up in China's recovery. Strong fixed investment, industrial production and retail sales data foreshadowed a fairly hefty growth rate for the final quarter of 2009.
Chan predicts the recovery will continue to gather pace due to the substantial stimulus set in train. He expects infrastructure construction and other investment projects funded with lending in 2009 will continue through 2010. The nascent recovery in exports is helping the coastal regions. Property market activity is booming, in the coastal areas but also in inland cities, he adds.
"The recovery remains in the hands of the government, and its focus has begun shifting towards slowing some overheating sectors of the economy," notes Chan. Big banks have been officially requested to slow lending. Meanwhile the central bank is increasing the yields for its bills issued, most likely to issue more bills in coming months to drain the liquidity in the system. Reserve ratios for commercial banks have been raised, and will likely be raised further, says Chan.
In a move to cool property activity, lending for purchasing second homes has been restricted. Meanwhile, a tax break on car purchases enacted in 2009 has been partially reversed for 2010. Stronger action such as higher interest rates on deposits and loans and currency appreciation are yet to make an appearance but the eventual move is drawing closer.
"If conditions continue their gradual improvement then growth for 2010 will outpace growth in 2009 by a fairly wide margin, with growth possibly touching double digits for the year," says Chan.