China
Date: 5 May 2011
The event will be held in Beijing, China, with the participation of distinguished participants from academia, government, civil society, international organizations, and the press. The list of well known participants making opening remarks, presentations and commenting on the publication includes:
Yu Yongding
Director
Institute of World Economics and Politics
Chinese Academy of Social Sciences
Aynul Hasan
Chief
Macroeconomic Policy and Analysis Section
Macroeconomic Policy and Development Division
United Nations Economic and Social Commission for Asia and the Pacific
LeRoy Hollenbeck
Head
United Nations Asia and Pacific Centre for Agricultural Engineering and Machinery
Press release
Country briefing note
Sustained strong economic growth
• In 2010, China emerged as the world's second largest economy with the GDP growth rate reaching a remarkable 10.3%. Economic growth in China was strongly supported by the growth in private consumption and investment. Fixed asset investment continued to be the main contributor of growth despite the winding down of government fiscal stimulus spending. Retail sales of consumer durables including automobiles and electronics showed particular strong growth, helping to pick up slack in external demand. Growth in private consumption was also aided by the steep increase in wages, including double-digit increases in minimum wages across most major manufacturing provinces of China .
• Property prices continued to soar with total investment in real estate development increasing by 33.2% year-on-year, raising concerns that China 's property market may be heading into an asset bubble. Stepping up of government efforts to curb overheating in the property market has had limited impact as yet.
• The export sector, especially for consumer durables which had been sensitive to the economic downturn, posted strong recovery in 2010. In nominal terms exports increased by 31% year-on-year while imports rose even faster by 38.7%, particularly during the first half of 2010 as restocking demand for raw materials, intermediate inputs and capital equipment increased in response to the global economic recovery. In addition, demand for import of vehicles and electronics also soared. Due to the large increase in imports, the current account surplus shrank considerably during the first half of 2010 before bouncing back in the second half.
• China recorded a large inflow of capital in both foreign direct investment and portfolio investment. China retained its position as the world's largest recipient of FDI. However, outward FDI from China also increased dramatically by over 23% year-on-year in 2010, highlighting China 's increasing role as a source of FDI, especially for Asia-Pacific economies.
• The 12th Five-Year-Plan on National Economic and Social Development, which covers the period from 2011 to 2015 indicate a shift in focus towards improving the quality of economic growth by making it more equitable and sustainable. This new strategy, translated into growth prospects for the near future, point toward a lower level growth of around 9.5% in 2011.
Rising inflation a major concern
• The inflow of foreign capital, rising food and fuel prices, and increasing nominal wages have contributed to higher inflation in 2010. Consumer prices which fell by 0.7% in 2009, recorded, on average, an increase of 3.3% in 2010. However, towards the end of 2010, inflation started to rise more rapidly and by March 2011, the inflation rate reached 5.4%. Inflation in 2011 is forecast to increase to around 4.5% in 2011.
• Early signs of overheating in the property market and higher-than-expected inflationary pressure led the Government to increase the benchmark rates several times since October 2010. After the latest increase of 25 basis points in April 2011, the one-year loan interest rate reached 6.31%.
• The Chinese yuan renminbi started to appreciate gradually following the move by the government in June 2010 to loosen the dollar/yuan peg that had been in place since July 2008. The Chinese currency is likely to continue to gain value against the dollar in 2011.
Budget deficit expected to narrow
• China continued to inject fiscal stimulus through spending on infrastructure projects and investment in agriculture, education and healthcare in 2010 but with plans to wind-down spending in 2011. Due to the ongoing rollover of increased spending, the budget deficit has increased slightly in China .
• In 2011, the government expects the deficit to narrow to around 2% of GDP as it wraps up the stimulus cycle.
Emerging challenges
• Although China achieved remarkable double-digit growth rates for the past decade, the distribution of growth has been skewed towards investment and exports. As stated in China 's 12th Five-Year Plan, rebalancing growth both domestically and internationally will be a priority goal for sustaining the dynamism of the Chinese economy. Empowering lower-income groups through the provision of adequate social protection programmes and reducing the income gap between rural and urban areas through rural development programmes are some of the policy measures that the Chinese government will implement to address this issue.