Official figures out today show that China’s economy grew 10.9% in the first half of 2006 and 11.3% in the second quarter alone, the fastest official growth rate in 12 years. So much for efforts to cool the economy.
Fixed-asset investment, lending, and money-supply are all showing above-target growth, but it is the rocketing trade surplus that should really cause concern.
The old bug-bear hit a record monthly high of US$14.5 billion in June as exports rose 23% year-on-year to US$81.3 billion while imports climbed a slower 19% to US$66.8 billion.
Headlines tomorrow will be screaming for the emergency brake, but watch for regulators to hold tight.
China’s long-term sustainable growth strategy depends on an increase in domestic consumption in an effort to divert the economy away from its dependence on export- and investment-led growth. But if China tightens its belt to cool the economy, imports will suffer, driving the trade surplus ever higher.
But as the regulators ride out the storm, it is certain they will do so with their fingers crossed, hoping that recent tightening measures kick in before the roof lifts clean off.