China overtakes Germany as world’s third-largest economy

17 July 2008

Beijing (dpa) – China has already overtaken Germany to become the world’s third-largest economy and is likely to post more robust growth of about 11 per cent during the first half of 2007, a top regional economist said on Tuesday.

China’s estimated gross domestic product (GDP) passed that of Germany “probably a few months ago,” leaving it behind only Japan and the United States, according to Stephen Green, senior economist at Standard Chartered bank in Shanghai.

Green said that China appeared to be still underestimating its GDP by up to 20 per cent, meaning that surpassing Germany “probably happened a long time ago, in reality. We think official GDP in China is still underestimated by 10 to 20 per cent.”

A survey released this month by researchers from the China Reform Foundation estimated the total “grey” income of urban residents at 75 per cent higher than the official figure, accounting for about 24 per cent of the nation’s annual GDP, the Hong Kong-based Asia Times said.

The government is expected to announce first-half GDP growth of about 11 per cent this week, after last week reporting an 84-per-cent increase year-on-year in its trade surplus to 112.5 billion dollars for January to June.

China has revised its calculation of estimated GDP several times over the last two years to bring it closer to international standards and take more account of growing service industries.

Last week it increased estimated GDP growth for 2006 to 11.1 per cent, or 21.09 trillion yuan (2.79 trillion dollars), marking the highest official growth for 12 years.

The ruling Communist Party has taken a series of measures designed to cool investment in some sectors and prevent overheating of the whole economy.

The commerce ministry says it expects export growth to slow down in the second half of this year, as government measures take effect.

The huge increase in exports in recent months was partly because firms rushed through exports before July 1, when China scrapped or reduced tax rebates for many categories of exports, the official China Daily newspaper quoted ministry spokesman Wang Xinpei as saying.

But Green said consumer price inflation is likely to continue to rise and that the government will find it difficult to reduce the trade surplus without allowing China’s renminbi currency to appreciate more quickly.

The China Securities Journal on Monday said the consumer price index is likely to have risen by more than 4 per cent in June, partly as a result of a 75-percent year-on-year jump in pork prices in June.

Consumer prices rose by 3.4 per cent year-on-year in May, the highest inflation rate registered in two years.

National statistics also showed large increases in the prices of meat, fish, vegetables, grains, edible oils, housing and public services last month, the newspaper said.

It quoted analysts as saying export-driven GDP growth was likely to have hit 11.1 per cent in the first half of 2007, with another jump of 26 per cent in fixed-asset investment.

The Chinese government in March approved measures designed to curb investment growth, promote domestic consumption and reduce China’s trade surplus.

It is also trying to move towards more sustainable and environmentally friendly economic growth.

The World Bank has forecast annual GDP growth of 10.4 per cent in China this year, citing continued expansion of exports and policy measures that were “less tight than expected.”

In May, the bank said the economy did not appear overheated and there was “no obvious need to tighten overall demand,” repeating its long-term recommendation that China’s leaders should focus on rebalancing the economy.

Rebalancing the Chinese economy “requires a shift in production from industry toward services, more reliance on domestic demand, and more equally shared and environmentally sustainable growth,” the bank said.

It said the primary macroeconomic issue for China remained its widening trade surplus.

DPA

Subject: German news