OK, for those of you who know what do do with it, China growth 2003 the 'directors cut' is here. China's economy officially grew 8.5% in 2003. Gross domestic product had its biggest annual gain since 1997: the world's sixth-largest economy managed a mere 8% in 2002. Xie Xuren, commissioner of the State Administration of Taxation, also informed a press conference in Beijing that fixed-asset investment which constitutes about a third of China's economy grew by 35%, and industrial production by 17%.
Now these numbers may be far from accuracte, however there is one interesting question to ask the growth sceptics: if the numbers are so inaccurate, is there any method to the madness? That is, is the error bias systematic? Or is it all just random? Because if the bias is sytstematic we should be able to do some triangulation and get some idea whether we're going north or south. I buy this latter argument, and so while I couldn't put my hand on my heart and say that 8.5% is the truth, the whole truth and nothing but the truth, I would be prepared to wager that growth last year was more than 2002, and that growth 2004 will probably be more than growth 2003. But that's just me.
Booming investment and production are helping China grow fastest among the 10 biggest economies. They're also raising concern about gluts forming that may force companies to discount. Standard & Poor's last month said markets including autos, consumer goods and property are at risk of oversupply
``With economic growth at the pace it has been the last two to three years, there is a certain nervousness whether the economy is overheating,'' said Ian Strickland, managing director of B&Q China, a home-improvement retailer with 15 stores in China. The company, a unit of London-based Kingfisher Plc, has invested $300 million in China in the past four years.
Peugeot and Chinese partner Dongfeng Motor Corp. said last week they plan to spend 600 million euros ($766 million) on plant and machinery to double their venture's production capacity to 300,000 vehicles by the second half of 2006. The partners plan to introduce their first Peugeot model, based on the French automaker's 307 compact car, this quarter.
Peugeot, Volkswagen AG and other overseas automakers have poured an estimated $20 billion into China, which is forecast to overtake Germany as the world's biggest automaker after the U.S. and Japan in the next two years. Production of cars, trucks and other vehicles will increase by a third to 6 million units by 2005, China's Association of Automobile Manufacturers predicts.
``Massive production capacity has created some worries,'' Standard & Poor's credit analyst Maria Bissinger said last week in Frankfurt. ``Profitability will drop over the next five to eight years on pressure from competition.''
At the same time as prices of cars, fridges and computers are falling, manufacturers' costs are rising as demand for raw materials increases. The cost of iron ore jumped 36 percent in November and prices of steel construction wire rose 24 percent, the statistics bureau said last month. Autos were 4.6 percent cheaper and home-appliance costs fell 2.3 percent.
The state has already tightened rules governing lending to property developers and aluminum makers to curb investment, and in September raised banks' reserve requirements to help damp loan growth. M2, the broadest measure of China's money supply, grew faster than the central bank's 18 percent targeted rate every month this year.