GDP forecasts revised after strong start

Construction workers toil on the roof of a new building being erected in Beijing April 1, 2007. [Reuters]

Stronger-than-expected economic figures have prompted a number of international economic research institutions to revise upwards their forecasts for China's gross domestic product (GDP) growth.

Almost all the major economic indexes in the first two months of this year have exceeded those for the same period last year.

"The country's GDP growth in the first quarter will be faster than in the equivalent period last year and also that of the previous quarter," Chen Dongqi, deputy director of the Institute of Economic Research of the National Development and Reform Commission, said. The State Information Center has adjusted its GDP growth forecast for the first quarter from 10.2 percent to about 11 percent.

Despite the government last year adopting a number of tightening measures, economic growth has shown clear signs of rebounding in the past quarter.

Statistics show that urban fixed-asset investment picked up moderately to 23.4 percent year-on-year in January-February, and from about 20 percent in the fourth quarter of last year, reversing the trend of a gradual slowdown since last July.

Meanwhile, the trade surplus registered a massive leap of 230 percent, and retail sales were up 14.7 percent on the first two months of last year.

"Industrial growth is a key driving force behind overall economic growth, and power generation is also a useful indicator," Chen said.

According to the National Bureau of Statistics, China's industrial output rose 18.5 percent year-on-year while industrial profits soared 43.8 percent in the first two months.

Growth in power generation also accelerated to 16.6 percent year-on-year from less than 14 percent in the same period last year.

Despite expectations the government will introduce another round of tightening measures soon, global investment bank, Lehman Brothers, still revised up its forecast for the Chinese economy.

According to a recent report by the firm, the first quarter growth forecast has been raised from 9.8 percent to 10.1 percent, and the annual growth rate from 9.6 percent to 9.8 percent.

"In the light of the stronger-than-expected figures in the first two months of this year and the likely policy responses, we have lifted our full-year growth projections for this year to 10 percent from 9.1 percent, based mainly on stronger growth in credit, investment and exports," Qu Hongbin, the chief China economist with HSBC, said.

Domestic banks extended new loans of 982 billion yuan ($127 billion) in the first two months of this year compared with 716 billion yuan ($92 billion) in the same period of 2006.

The government forecast early last month that the country's GDP is to grow by about 8 percent this year.

The country has just witnessed four consecutive years of double-digit growth, including 10.7 percent GDP growth last year, the fastest in a decade.

The latest official forecast reflects the authorities' determination to shift the focus of economic growth from quantity to quality.