Chinese Economy Expanded 11.5% in Q3

The purpose of the excerpts below from an article in Market Watch, is to give people a feel for the amazing growth of the Chinese economy. The Chinese economy is a tremendous growth engine that is busy developing its infrastructure. The real risk to this growth is an economic slowdown in the US, because it is an export driven economy.

China's economy, the biggest contributor to global growth, expanded 11.5 percent in the third quarter, . . . . . compared with an 11.9 percent gain in the second quarter, the fastest pace in 12 years.

A record trade surplus helped drive a 26.4 percent surge in factory and property spending in the first nine months, . . . ``

The government confirmed today that inflation cooled in September to 6.2 percent from an almost 11-year high of 6.5 percent in the previous month after food-price gains slowed.

``The surging economy has stabilized, while rising prices have been brought under control through a combination of monetary, fiscal policies and administrative measures,'' said Li Xiaochao, the statistics bureau spokesman. Oil prices, the U.S. housing recession and weaker U.S. consumption pose uncertainties, he said.

The pace of consumer-price gains was still more than double the central bank's annual target of 3 percent and higher than the key one-year deposit rate of 3.87 percent, encouraging stock and property speculation.

Urban fixed-asset investment growth is outpacing the 24.5 percent gain for all of 2006. Investment accounted for 42 percent of GDP expansion in the first nine months, versus the 37 percent share for domestic consumption, the statistics bureau said. External demand made up 21 percent. Industrial production increased 18.9 percent in September from a year earlier, the fastest pace in three months and up from 17.5 percent in August, the government said. Retail sales climbed 17 percent after gaining 17.1 percent.

China's taken six years to achieve 40 percent of a 20-year target of quadrupling per-capita GDP by 2020, spokesman Li said, citing an increase to 16,084 yuan this year.

A 69 percent surge in the trade surplus in the first nine months to $185.7 billion has flooded the economy with cash. It's also prompted calls by U.S. Treasury Secretary Henry Paulson and the Group of Seven nations for a stronger Chinese currency, which would ease trade tensions and the inflow of money by making exports more expensive.

A report circulated last week within the National Development and Reform Commission, China's top economic planning agency, called for a 15 percent to 20 percent one-off revaluation, Market News reported yesterday.

The yuan has climbed more than 10 percent versus the U.S. currency since the end of a fixed exchange rate in July 2005 and fallen 7 percent against the euro.

For China, a slowdown ``may expose a severe overcapacity problem, leading to excessive inventory, unemployment, a pile-up of non-performing loans and sharp declines in corporate earnings,'' said Sun Mingchun, an economist at Lehman Brothers Holdings Inc. in Hong Kong. ``The government needs to add investment restrictions and boost consumption.''