Monday, January 19, 2009

China Revises to #3

The Chinese economic expansion is entering a much needed consolidation as occurred among the early adopters such as Japan and others twenty years ago. This phase should be characterized by strong domestic and government investment in both new infrastructure and reconstruction. This time, build the schools properly and show that the lives and health of the people is respected.

China can now implement necessary labor market reforms and proper health and educational services. The economy is rich enough to accommodate what is after all an investment in future government revenues.

China has shown that it can mobilize its resources to achieve it goals in a very proficient manner, although there is the usual nit picking and cheap shots. When there are government resources and lolly to distribute, you can count on a corruption loss. I am still waiting for an apology to the American people for the unseemly free for all that we saw in Iraq under US management.

At least the Chinese shoot a few from time to time to encourage honesty among the rest. Otherwise they would need to sharply increase their police force.

We all can see things in China that needs to be improved. Fortunately, so do the Chinese and they know the solutions as well as we do. I suspect we only need to come back in five tears to see the problems abate.

China revises figures, 'becomes world's number three economy'

by Staff Writers

Beijing (AFP) Jan 14, 2009

China revised upwards its 2007 growth figures Wednesday, indicating the Asian giant overtook Germany as the world's third largest economy, analysts said.

China's economy expanded by 13.0 percent in 2007, up from a previous calculation of 11.9 percent, the National Bureau of Statistics said.

"At market exchange rates, China in 2007 was the third largest behind the US and Japan," Vivek Arora, senior resident representative with the IMF in Beijing, told Dow Jones Newswires.

The economy was worth 25.7 trillion yuan in 2007, the statistics bureau said, or about 3.5 trillion dollars based on the exchange rate at the end of that year.

"It indicates the speed of economic growth in the year was beyond what people previously imagined. The economy was overheated beyond what people estimated," said Ren Xianfang, a Beijing-based analyst with Global Insight.

"The figures here mean China has surpassed Germany," she said, citing World Bank estimates. "Germany's economy was 3.3 trillion dollars in 2007 while China's economy was much bigger than that."

China is now only behind the United States, whose economy was worth 13.8 trillion in 2007, and Japan, at 4.4 trillion, according to World Bank figures.

"It reflects the remarkable success of a strategy that links China up with the world," said David Zweig, a political scientist at the Hong Kong University of Science and Technology.

"But it also means a lot of the growth in China is based on that global linkage and that makes China more vulnerable to global fluctuations in the economy," he said.

China became the fourth largest economy in 2005, when it grew 10.4 percent, speeding past France, Britain and Italy.

The revision put the 2007 economic growth second only to the 13.1 percent growth seen in 1994, Ren said.

But the revised figures could serve only to make the slowdown between 2007 and 2008 appear sharper, economists said.

"The change in GDP estimates for two years ago will not alter the economy's near-term outlook," said Sherman Chan, an economist with Moody's

"The only effect is perhaps negative, as a stronger 2007 would make the 2008 slowdown more upsetting," she wrote in a research note.

China is expected to release its full-year economic figures for 2008 next week.

The Chinese economy grew by nine percent in the third quarter, the lowest rate in more than five years, and the World Bank has forecast 2008 growth of 7.5 percent, a level not seen since 1990.

"For 2009, a further slowdown is projected, as the global economy remains in a dismal state, hurting China's export-related businesses, which have been the bread winner for the country," Chan said.

The bureau said this was the final revision for 2007 economic numbers, after reporting in January last year that growth was 11.4 percent, then upgrading it to 11.9 percent in April.

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