China to be third largest economy

Updated: 2007-07-11 22:35

China's sizzling economy grew even faster in 2006 than previously reported, the government said Wednesday, moving it closer to overtaking Germany as the world's third-largest and possibly adding to fears of overheating.

In this file photo a shop assistant checks hundred yuan bank notes at a shop in Xiangfan, central China's Hubei province, August 19, 2006. China's foreign exchange reserves, the world's largest, swelled to $1.33 trillion by the end of the first half on the back of massive trade flows that contributed to an acceleration in money supply growth in June. [Reuters]

The National Bureau of Statistics raised its estimate of China's 2006 growth rate from 10.7 percent to 11.1 percent. It nudged up its estimate of total output by 146.4 billion yuan ($18.8 billion) to 21.1 trillion yuan ($2.705 trillion).

The revision brought China closer to Germany, the world's third-largest economy after the United States and Japan. Germany's 2006 output was $3 trillion but its 2.5 percent growth rate was well below China's.

The statistics agency routinely issues such revisions to economic growth rates. But the latest report could receive special attention from Chinese leaders, who are trying to rein in a boom that they worry could ignite a financial crisis.

Chinese leaders want to maintain fast growth to reduce poverty but are trying to slow investment in auto manufacturing, real estate and other areas where supply outstrips demand. They worry that runaway spending could ignite inflation or leave banks and borrowers with dangerously high debt levels.

In the most recent official forecast, the central bank's research bureau said last month the economy was expected to expand by 10.8 percent this year. That was in line with projections by the World Bank and other economists, and would be China's fifth straight year of growth in excess of 10 percent.

Wednesday's revision was in line with the opinions of outside economists, who said the earlier figure seemed too low, suggesting the economy was slowing despite surging exports and other indicators.

The change comes amid reports of double-digit growth in industrial output, investment and other economic indicators.

China's trade surplus soared to a new monthly high of $26.9 billion in June, the government reported Tuesday. That was despite official efforts to narrow the ballooning trade gap by repealing rebates of value-added taxes on exports.

The statistics bureau's brief announcement on Wednesday said the biggest increase in China's estimated output was in secondary industries, which includes manufacturing, construction and utilities.

The exact size of China's economy is a matter of debate, with foreign analysts saying the small statistics agency lacks the resources to provide more than a general estimate.

In December 2005, Beijing raised the official size of the economy by nearly 17 percent and retroactively boosted annual growth figures for the previous decade following the first nationwide census of China's booming service industries such as restaurants.

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