Lehman Brothers: China, an economy bigger than imagined

Lehman Brother has issued the latest review of Asian economy (Japan not included), saying that China is likely to become the world's fourth largest economy in 2005.

The review points out that according to the nation's first one-year-long national economic census, China's 2004 GDP has been revised to 1.93 trillion US dollars, 278 billion US dollars (equivalent to the entire Indonesia's) more than that provided earlier.

The comment says, according to our calculation, the Chinese economy will at least bulge at least to 2.2 trillion US dollars, surpassing France and even Britain, to be the fourth largest in the world.

As shown in the revised results, China's economy will be improved in various aspects.

First the contribution of final consumption to GDP for 2004 is raised from 36.3 percent to 37.8 percent.

The revised figures on investment have not been released, but considering the services sector is relatively low in investment, the share of investment in the 2004 GDP will probably be lowered from 43.8 percent to around 40 percent.

That means the over-heated investment in China's economy and the consequent over-supply are not as serious as previous imagined. The sustainability of China's economic growth is as well more promising than before.

Second, many economic indexes have all been improved.

China's per capital GDP for 2004 has been revised to nearly 1,500 US dollars; the foreign debt-GDP ratio lowered to 11.8 percent and that of non-performing loan lowered to 10.7 percent; China's surplus in current account, taking up 3.6 percent of GDP, look not so shockingly big,.

As the review says, what is worth attention is that China's investment and current account surplus are still growing very fast. In 2005, the country's investment accounts for as much as 40 percent of GDP and the surplus of current accounts is predicted to be 6.4 percent of GDP. The pressure for a revaluation of Renminbi still exists. The proportion of consumption to GDP should also be increased while that of investment should drop to a more balanced level.

By People's Daily Online