China maintained its solid growth momentum in 2005, with an increase of 9.9 percent in its GDP amid oil price hikes, trade disputes and frequent disasters. It was seen to be getting closer to balanced growth.

Commissioner Li Deshui of the National Bureau of Statistics (NBS) announced that China's gross domestic product (GDP) had reached 18.23 trillion yuan (2.3 trillion U.S. dollars) last year, or 1,700 dollars per capita.

China overtook Italy as the world's 6th biggest economy after a national economic survey found under-reported service sector output for 2004. The United States, Japan and other developed economies have yet to release their 2005 growth figures.

China's primary, secondary and tertiary sectors posted a respective 2.27 trillion, 8.62 trillion and 7.34 trillion yuan in added value, with the secondary sector, including industry, manufacturing and mining, growing at the fastest pace -- 11.4 percent -- last year.

Preliminary government figures show that consumer spending, investment and exports contributed to 33.3, 48.8 and 17.9 percent of the GDP growth.

For a long time, the Chinese economy has been driven by hefty investment, but Li said consumer spending was playing a greater role. "As for the future growth model, we will definitely try to spur consumption and raise its contribution to economic growth."

Other evidence for fair growth is that government investment in the less dynamic central and western areas rose 32.7 and 30.6 percent, respectively, much faster than the 24 percent increase in east China.

On roughly 900 million farmers that critics say have been left behind by the country's quarter-century-old reform and opening-up, the government abolished agro-taxes for them and vowed to speed up the construction of rural facilities in the so-called New Socialist Countryside campaign.

Farmers' per capita income rose 6.2 percent in real terms to 3,255 yuan in 2005, still lower than the 9.6 percent increase for urban residents. Li Deshui acknowledged it was difficult to raise farmers' earnings.

"2005 was a very successful year for China's economy," chief economist Tang Min with the Beijing office of Asian Development Bank told Xinhua.

He said China's growth was laudable. It was achieved amid numerous financial problems and at a time when investment in allegedly overheated sectors, such as iron and steel, was being reduced.

But Tang said GDP is not the sole criterion of a harmonious society.

Road accidents killed more than 90,000 in 2005, while mining accidents remained unstopped even after the government issued stringent orders.

Answering a journalist's question on whether industrial overcapacity could lead to deflation, Li, the top statistician, said there was no tangible signs of inflation or deflation in China.

But he warned that there was "severe overcapacity" in some industries, pointing out that steel production capacity could reach 600 million tons if all plants go into operation, compared with the world's total steel output of 1 billion tons in 2004.

Nearly two-thirds of the economists recently polled by the NBS said it was "not very likely" to see deflation this year.

Li said inflationary elements, including fast growth of the money supply, also exist.

China received 60.3 billion U.S. dollars in foreign direct investment (FDI), representing a marginal slowdown of 0.5 percent. "This is very stable and not worth worrying about. There are no abnormal phenomena," Li said.

Overseas investment in the financial sector, which is not calculated as FDI, was on the increase.

Li refuted the claim that China pushes up global oil prices, saying its impact was "limited." China's net imports of crude and refined oil fell 5.3 percent year-on-year in 2005.

Riding on the back of three strong growth engines (investment, consumption and exports), stable macro-economic policies and continuously prudent fiscal and monetary policies, the Chinese economy is full of vigor, Li said. noting, "I am guardedly optimistic about the 2006 economy."

He said the economy is still challenged by "weak links in agriculture, difficulties in increasing grain output and farmers' income, the scale of investment, economic structures that are not very rational, and inefficient growth patterns."

Song Guoqing, an economic professor at prestigious Beijing University, predicts that this year's growth will be similar to 2005.

He said investment will remain sufficiently strong to offset possibly slower export growth, since consumer spending will not increase much in the short term.

Source: Xinhua