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China's economy may have overtaken France
(Bloomberg.com)
Updated: 2006-01-23 10:43
China probably overtook France as the world's fifth-largest economy in 2005
as a record trade surplus and surging investment drove the fourth straight year
of more than 9 percent growth.
Gross domestic product increased 9.8 percent, according to the median
estimate of 23 economists surveyed by Bloomberg News. The economy grew 10.1
percent to $2 trillion in 2004. The statistics bureau will report GDP and other
economic data for 2005 on Jan. 25 at 10 a.m. in Beijing.
The government is stepping up efforts to increase consumer spending in a
nation where per capita incomes are still a 16th of France's, supporting the
economy as it curbs runaway investment in steel plants and real estate. That may
bolster demand for Ford Motor Co. cars and Nokia Oyj cell phones.
``China's economy will have very strong growth but the model will be
different,'' said Jason Jiang, chief executive of Focus Media, China's biggest
outdoor advertising company, which counts Nokia and Ford among its clients.
``Chinese people now have greater purchasing power and they are willing to spend
because they are more optimistic about the future.''
A nationwide census completed last year revealed millions of previously
unaccounted-for companies in service industries such as retailing, real estate
and the Internet. The survey led officials to conclude that the economy was $284
billion, or 17 percent, larger than previously thought in 2004.
Driving Force
After the revision, China moved up to sixth place in the economy rankings.
The U.S.'s $12 trillion economy stands at No. 1, and Japan's is the
second-largest, at $4.7 trillion. Germany and the U.K. are also still ahead of
China.
On Jan. 9, the statistics bureau raised its estimate for 2004 GDP growth to
10.1 percent from 9.5 percent to reflect the census findings. The National
Development and Reform Commission, the nation's top economic planning agency, on
Jan. 5 said the economy likely expanded 9.8 percent in 2005.
China's economy probably expanded 9.5 percent in the fourth quarter,
according to the median forecast of 21 economists surveyed by Bloomberg News.
The statistics bureau hasn't issued revisions to historical quarterly growth
figures.
Growth may cool to as little as 8.5 percent this year as China keeps lending
curbs on investment and last year's record $102 billion trade surplus narrows,
the agency's research unit said in a report in the official China Securities
Journal. Economists surveyed by Bloomberg News forecast 9 percent expansion.
Japan's government expects GDP growth of 1.9 percent this year.
``China will still be a very important driver'' of global growth, said
Stephen King, head of global economic research at HSBC Holdings Plc. ``We've
already seen from last year's upward surprises that it has a big impact on
energy prices globally, on commodity prices globally. I can't see that changing
very much this year.''
Annual growth averaging 9.6 percent over the past 25 years made houses, cars
and mobile phones affordable to millions of consumers. China is now the world's
largest mobile-phone market, with more than 380 million subscribers, and the
fastest-growing major car market for Ford and General Motors Corp. Ford's car
sales in China jumped 46 percent last year, it said Jan. 16.
There's still room for growth. Only eight in 1000 Chinese owns a car,
according McKinsey & Co. Mobile-phone penetration stood at 29 percent in
November. In Hong Kong, China's special administrative
region, there are more cell phone accounts than people.
China's retail sales probably gained 13 percent in 2005 and may maintain that
pace this year, the National Development and Reform Commission said Dec. 27. For
December alone, retail sales probably rose 12.7 percent, according to a
Bloomberg survey.
``You have within China a core of people in the urban areas with significant
incomes and you are beginning to see some pick-up in their consumption,'' Steven
Dunaway, deputy director of the International Monetary Fund's Asia and Pacific
region, said in a telephone interview from Washington.
Still, China had more than 100 million people living in poverty at the end of
2004, more than the population of Germany, and average per capita income ranked
129th in the world at about $1500, behind Egypt and Iran, statistics bureau
commissioner Li Deshui said on Dec. 20.
The government abolished agriculture taxes from Jan. 1 this year and is
raising thresholds on income tax, increasing minimum wages and civil servants'
salaries. Even so, measures adopted so far will likely only provide a temporary
boost to consumer spending, said Dunaway of the IMF.
``If the government wants a long-term solution, it has to have a properly
functioning financial system to give people access to credit, and increase
spending on health, education and pensions,'' he said. ``That could
substantially diminish the strong savings motive among households and give them
the confidence to increase spending.''
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