China's global economic growth

As the Chinese government look set to announce that the country's annual economic growth will reach 12 percent in the first quarter of 2010, it becomes clear that the communist state are quickly becoming the benchmark for sustained economic growth and must be considered serious competition for the once untouchable United States.

However Yu Bin, head of macroeconomic research at the State Council Development Research Center, did say the Chinese economy would face relatively heavy downward pressure on the pace of growth in the second quarter and thereafter, the official Shanghai Securities News said. And even though it is likely that this extraordinary level of growth will not continue, when compared to last years figures it soon becomes clear how impressive China's growth is. China's GDP growth picked up steadily last year to 10.7 percent in the fourth quarter from 6.2 percent in the first, as aggressive government stimulus bolstered economic growth after a heavy blow from the global financial crisis.

The economic monster

In the first two months of this year, China's industrial output surged 20.7 percent year on year, fueled by this stimulus package.

It is widely expected that throughout the whole of 2010 China's economic growth could easily surpass double figures as exports recover and household consumption remains strong, it is also expected that Beijing will ignore advise from the World Bank to tighten its macroeconomic policy through 2010 in a move to fight off inflation concerns and a real estate bubble.

The economic monster China has created has become almost impossible to control, and even though government-led investment will undoubtedly decelerate over time exports are likely to continue to recover amidst a pick up in the global economy, real estate activity is likely to continue growing strongly this year and consumption should remain solid.

Combining "growing" with "knowing"

Government reforms that began in the late 1970s turned China from a centrally-planned, closed economic system into a more market-orientated economy. China's private sector has exploded since the government implemented measures such as expanding to include the gradual liberalization of prices, fiscal decentralization, building the foundation of a diversified banking system, developing stock markets, encouraging the growth of the non-state sector and opening up to foreign trade and investment.

Over the last 20 years China's economy has relied heavily on capital accumulation, but in the future productivity growth will become more important and that is what's beginning to happen now. What China is currently doing well is combining its "growing" with its "knowing" as so many of the Chinese workforce are learning as they are working.

Thanks to technology imports, better education, more efficient financial institutions, more rule of law, and better infrastructure, productivity in China is able to keep on improving as well as growing. But all of these contributing factors (increased privatisation, investments in education and infrastructure) must all continue to grow alongside the economy if China's exponential growth is to be truly sustainable.

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