Alexa

China says economy grew by 10.7 percent in 2006, still facing strains

China says economy grew by 10.7 percent in 2006, still facing strains

China's sizzling economy grew by 10.7 percent last year and faces strains from a soaring trade surplus and excessive investment, the government said Thursday, leaving open the possibility of more interest rate hikes or economic controls.
The annual growth figure was China's highest since the 10.9 percent rate reported in 1995 and exceeded forecasts by both Chinese and foreign economists.
This year, the economy is expected to continue "steady and comparatively fast development," the commissioner of the National Bureau of Statistics, Xie Fuzhan, said at a news conference.
Investment in real estate and other fixed assets grew by 24 percent, the agency said. The government has been trying to hold down investment growth, warning that excessive spending could spark inflation or lead to a debt crisis.
"Outstanding problems still exist with the irrational relationship between investment and consumption, the imbalance of payments and excess liquidity in the banking system," Xie said.
The government has raised interest rates twice in the past year and repeatedly tightened bank credit in order to rein in a boom in investment in real estate and other assets that it warns could spark inflation or a debt crisis.
Despite those measures, the statistics bureau said real estate investment last year rose by 21.8 percent _ a growth rate 0.9 percentage points higher than the previous year.
China's economy also faces strains from the country's swelling trade surplus, which is challenging the government's ability to contain inflationary pressures amid a flood of export revenues and foreign investment.
The government announced earlier this month that the country's global trade surplus in 2006 jumped nearly 75 percent from the previous year to a record $177.5 billion.
Incomes of urban Chinese households grew 10.4 percent in real terms last year, while those in the countryside rose 7.4 percent, the statistics agency said.
Retail sales grew at an annual rate of 13.7 percent, up slightly from the previous year, the agency said.
The government has been trying to boost domestic consumer spending to reduce the economy's reliance on investment and export-driven manufacturing.
Industrial output rose by 12.5 percent, the statistics agency said.
___
Associated Press Writer Scott McDonald in Beijing contributed to this report.