Nation's GDP to expand 8% to 9% in 2006
(AFP)
Updated: 2005-12-23 10:07

According to Yao Jingyuan, chief economist at the National Bureau of Statistics, the economy is expected to slow fractionally in 2006 from the 9.4 percent annualised rate recorded in the first nine months of the year.

Investment and net exports, the main drivers of recent growth, would still spur on the economy and the government was also expected to stimulate domestic consumption, said Yao Thursday.

On Tuesday the statistics office said the total value of the economy at end-2004 was in reality 16.8 percent or 284 billion dollars more than previously estimated.

The miscalculation, mainly in the service sector, meant China hopped over Italy to become the world's sixth largest economy with more than 1.97 trillion dollars in gross domestic product.

China, however, is growing much faster than Europe and many believe the world's most populous country has already overtaken Britain as the world's fourth largest economy, which last year registered GDP of about 2.14 trillion dollars.

Most analysts expect the mainland economy to slow a little next year. But economist have long held that over the past few years China has in reality been expanding at around 11 to 13 percent, which would be in line with the latest revision.

The government has said it plans to increase domestic demand in the coming five years and reduce the economy's reliance on investment and trade in a bid to rebalance the growth model.

But this will not happen overnight and investment -- particularly that driven by local governments -- will continue to play a pivotal role in driving growth.

"China's consumption will play an increasingly important role next year," Yao told a financial forum in the Chinese capital.

"However, it's unlikely that consumption-boosting measures will work overnight so investment will continue to be the largest engine for growth next year," he said.

Yao said Beijing's burgeoning trade surplus, which according to Chinese calculation methods is expected to hit 100 billion dollars in 2005, would place upward pressure on the yuan.

China's major trading partners the European Union, the US and Japan view the yuan as sharply undervalued and say that gives mainland exports a competitive price advantage.

Although China in July revalued the yuan by 2.1 percent, releasing it from a decade-long peg of 8.28 to the dollar, the currency has since traded in a narrow band of around 8.0.

Trading partners and especially Washington, which sees its trade deficit with Beijing at a record 200 billion dollars, want to see greater flexibility in the currency sooner rather than later.