The Chinese economy grew at a blistering pace in the final quarter of 2009 but inflation jumped towards the end of the year adding fuel to concerns that the economy is overheating.
The gross domestic product or GDP rose 10.7% year-over-year in the fourth quarter, faster than the 9.1% increase in the previous quarter and the 7.9% growth in the second quarter, the National Bureau of Statistics said on Thursday. It came roughly in line with forecasts for a 10.5% increase. This easily exceeds the performance other major economies, with the U.K. posting an annual GDP growth rate of -5.1% in the third quarter, Japan +1.3%, Australia +0.5% and the U.S. -2.6%.
The GDP for the calendar year 2009 was CNY 33.54 trillion, up 8.7% from the previous year - well above the government's 8% growth target. That said, the growth rate was nine-tenths of a percentage point lower than in the previous year.
The red-hot performance makes it likely that China will overtake Japan to become the world's second largest economy later this year. It has already leap-frogged Germany to become the largest exporter in the globe.
Consumer prices climbed 1.9% year-on-year in December, accelerating from the 0.6% rise in the previous month - the second straight monthly rise following nine months of deflation. Economists were looking for a 1.6% gain.
In full-year 2009, prices declined 0.7% compared to a year ago. Prices dropped 0.9% in cities and fell 0.3% in rural areas.
Meanwhile, the producer prices index grew 1.7% annually in December, coming in well above expectations for a 0.5% increase. In 2009, prices were down 5.4% from the previous year.
Separate reports showed that industrial production and retail sales also surged ahead in December. Industrial production increased 18% year-on-year in the fourth quarter, faster than the 12.4% rise in the previous quarter and the 9.1% growth in the second quarter.
In December alone, industrial production grew 18.5% annually against expectations for a 19.6% gain. In 2009, industrial output surged 11% compared to a year ago.
Retail sales were up 17.5% annually in December, coming in above expectations for a 16.3% gain. In calendar year 2009, retail sales climbed 15.5%.
China has led the global recovery, thanks to its large stimulus measures. At the end of 2008, the Chinese government announced a CNY 4 trillion stimulus plan involving increased spending on infrastructure, such as rail and roads, to boost the economy.
Latest figures showed that urban investments in fixed assets for full-year 2009 increased 30.1% to CNY 22.48 trillion, below expectations for 31.5% growth.
A government spokesman said that the economy had recovered and was moving towards a "favorable" direction.
The resoundingly positive nature of the latest economic data is likely to force the hand of policy makers to earnestly begin withdrawing the ultra loose monetary policy in effect. Beijing has already begun unwinding elements of the stimulus plan by reducing the huge outflows of credit from the country's state owned banks.
The Chinese yuan gained strongly against the U.S. dollar and rose to a two-day high following the release of the economic reports.
Meanwhile, the Chinese equity market recovered from a weak start on Thursday following the release of the slew of economic reports, although they have retreated thereafter, tracking the negative sentiment in the rest of the Asian markets. Yesterday, the Shanghai Composite Index had succumbed to severe selling pressure on fears over introduction of additional lending curbs.
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June 12, 2026 17:14 ET Major central bank action was the focus this week in economic news. The European Central Bank became the first major central bank to move in response to the rising inflationary pressures in the backdrop of the conflict in the Middle East. In North America, the U.S. inflation and trade data as well as Canada’s central bank decision gained attention. The Chinese trade data was the main news in Asia.