Economic growth figures released this morning were just about in line with street predictions with fourth quarter gross domestic product up 10.7% year-on-year, doing little to allay fears of an impending bubble. China isn’t pursuing a high economic growth rate, said Ma Jiantang, director of the National Bureau of Statistics. He attributed the double-digit growth to a low base line, as the economic downturn caused exports to plummet at the end of 2008. The 10.7% figure was just slightly lower than the 10.8-10.9% rate predicted by some analysts, but represented a sharp increase from the 9.1% recorded in the third quarter of 2009. It also served to pull the year’s growth up to 8.7%, beating the government goal of 8% and outperforming analysts’ forecasts of 8.5%.
Of course, observers are agitated. The numbers came right on the heels of news that the central government wants Chinese banks to stop issuing renminbi loans due to overly fast lending growth in January and shortly after news broke that capital reserve requirements were being raised. Everyone fears a sharp correction if the government should radically make an abrupt change to the monetary policy which has for a long time now been loose, but until then, analysts and observers are all waiting for the fall of the Chinese economy so they can say, “We told you so.” China looks like “Dubai times 1,000 – or worse,” said hedge fund-investor James Chanos, one of the first investors to foresee the 2001 collapse of Enron.
However, demand in China is still high, which was not the case in Dubai in 2009 when all the lovely properties built on credit for wealthy tourists and financial services companies went unused in the wake the global financial crisis. The rate of urbanization and development in the world’s most populous country and the second-largest economy could actually warrant such rapid, loosely bridled growth, and given the government’s private stash of US securities, it might not be such a risk.