China economy shows strong growth in 2009 | |||||||
China has said its economy expanded by 8.7% in 2009, exceeding even the government's own initial expectations.
The pace of change increased as the year went on, with growth in the final quarter of 2009 increasing by 10.7% from the same period a year earlier.
China is now on course to overtake Japan and become the world's second-biggest economy.
Japan announces its latest quarterly gross domestic product (GDP) figures next month.
The Japanese economy is likely to have contracted by about 6% in 2009.
'What the world needs'
Jim O'Neill, chief economist at Goldman Sachs, said that China had come up with "a very smart policy stimulus" and that some aspects of the financial crisis may not have been a bad thing.
"[In] November 2008, they came up with a quick, aggressive fiscal and monetary response which has worked," he told BBC Radio 4's World At One programme.
"They have replaced exports with domestic demand, both consumption and investment... China has become more important as America [has become] less, which is what the world needs."
He said part of the reason behind the global crisis was that the world had become dependent on the US consumer, and the realisation of that had now forced countries to stand up for themselves.
"The most important one is China and their economy is now being driven by their own domestic economy, which will not only be increasingly important for them but important for everyone else including - directly and indirectly - people in Britain," he said.
'Right direction'
China's GDP announcement was made by Ma Jiantang, head of the National Bureau of Statistics.
He said China had faced "severe difficulties" in 2009, but its economy has now recovered and was moving in the right direction.
Annual growth was only slightly down on 2008.
These latest GDP figures have exceeded the target set by the Chinese government, the BBC's Chris Hogg in Shanghai says.
This is a turnaround because China, like other countries across the world, was hit by the economic crisis during late 2008 and early 2009. Factories closed and workers were laid off.
The economy recovered with the help of a massive government stimulus package but now there are signs it is expanding too quickly.
"There's very strong growth but there's real concern about the quality of the growth and what will happen when the stimulus is withdrawn," said Michael Pettis, professor of finance at Peking University.
"It seems pretty clear that any withdrawal of the investment stimulus is going to have a big impact on growth."
Inflation is also picking up, with consumer prices increasing by 1.9% in December from a year earlier.
Chinese authorities are expected to now take measures to prevent the economy from overheating.
Economists expect interest rates to rise, while banks have already been ordered to keep more money in reserve, and reports say some have even been told to stop lending for the rest of January.
'China's reality'
But Mr Ma played down speculation that China's economy had now overtaken Japan's.
"According to the UN standard - that is $1 a day - there are still 150 million poor people in China. That is China's reality," he said.
"So despite the increase in our GDP and economic strength, we still have to recognise that China is still a developing country."
On inflation, he said that price rises were "mild and under control".
Predictions
Meanwhile, the World Bank has said that the global economic recovery will slow later this year as the impact of government stimulus policies wanes.
The Bank has forecast growth of 2.7% this year after a contraction in 2009.
However, its predictions for Japan are slightly less pessimistic than other forecasters. It estimates that Japan's economy shrunk by 5.4% last year.
It added that the poorest countries - those that rely on grants or subsidised lending - may require an additional $35bn to $50bn in funding just to sustain pre-crisis social programmes.
China is expected to become the world's biggest economy in 2030.
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According to Fidelity International’s China-focused portfolio managers, there will be a number and risks and opportunities facing investors in 2019.
According to Raymond Ma, portfolio manager for the China consumer sector, while US trade tensions will take their toll on the equity markets, the Chinese government is expected to respond with measures to support internal fiscal growth.
“Chinese equity markets are expected to remain volatile in the near term, due to concerns around escalating trade tensions between the US and China, a depreciating renminbi and a potential slowdown in the Chinese economy,” he said.
“Given the rise in trade tariffs, Chinese corporates are expected to witness a decline in exports, and a reduction in earnings and capital outflows, as some companies consider shifting their production base outside China.
“The good news is that the Chinese government is likely to introduce more fiscal and monetary loosening policies to support the domestic economy and consumer sector. As a result, money supply and liquidity conditions should improve going forward.
Mr Ma said the fixed asset investment is expected to continue in growth, while reforms will give encourage production productivity.
“We could also see an acceleration in fixed asset investment growth, while consumption growth is expected to remain relatively resilient. Ongoing supply-side reforms are also likely to boost China’s production efficiency and improve corporate earnings.
“With the recent correction in equities, market valuations have fallen. Consequently, we may see a window of opportunity in the next two to three quarters as some resolution is reached on the trade war,” he concluded.
Jing Ning, China portfolio manager at Fidelity International, agrees adding that the current low-growth environment is likely to stabilise the economy moving forward.
“China has entered a relatively low-growth phase of economic activity, compared to a decade ago. This has positive implications: the economy is likely to be less cyclical, and structurally driven by consumption, rather than fixed asset investment,” she said.
“Chinese corporate balance sheets have significantly improved and companies are more conscious about capital expenditure, while managements are adopting a more mature approach towards efficient capital allocation and reducing leverage. In a distinct shift towards increasing shareholder value, dividend payouts are also garnering attention, which markets have so far under-recognised.
She said despite trade tensions continuing to be a concern, Chinese corporates remain innovative and an increasing workforce may see growth in key growth areas such as technology and automation.
“The external trade-related matters reflect the emergence of a new age in Sino-US relationships, where there is likely to be less emphasis on co-operation. Nonetheless, the momentum of innovation at Chinese corporates is quite positive, which provides thrust to its extensive integration in global manufacturing value chains,” she said.
“China also has substantial human capital in its universities and vocational schools, which it can potentially monetise over the next decade in areas such as automation, health care, media and technology.
“As China faces external uncertainty, it will respond with measures to stimulate internal growth. Chinese policymakers have a clear intention to support economic activity, which they have demonstrated on several occasions in 2018. The series of Reserve Requirement Ratio cuts seen during the year is one such manifestation of this intent. While the impact of additional liquidity will be felt with a lag in the economy, it confirms that policymakers will be proactive,” she concluded.
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