China’s National Bureau of Statistics said that the economy expanded by 13 per cent in 2007, a sharp increase from the 11.9 per cent growth rate the authorities had previously stated.
With only the US and Japan now larger than China, the new figures highlight the rapid transformation the Chinese economy has undergone over the past 30 years since the Mao-era controls were first eased, although the economy is now suffering the toughest period in a decade as a result of the global financial crisis.
The news will also reinforce the case for giving China and other large emerging economies a bigger role in global financial decision-making, even if China has been hesitant about taking on new responsibilities.
“It is symbolically significant that China is now bigger than Germany and it will not be too long before its economy overtakes Japan,” said Mark Williams, at Capital Economics in London.
After slowing sharply in recent months, many economists believe Chinese growth this year will fall well short of the 8 per cent that government officials are predicting. However, given the steep declines forecast in many developed economies as a result of the crisis, China will be one of the main contributors to global growth.
In the medium-term, economists say there is still plenty of scope for China to maintain relatively high growth rates because the process of urbanisation and technology catch-up still has decades to run, however the outlook will be complicated by a rapidly ageing population and the costs of heavy damage to the environment.
Goldman Sachs has predicted that the Chinese economy will overtake the US by about 2040, while the Economist Intelligence Unit forecasts that using purchasing power parity, which adjusts for price differences between countries to reflect the actual buying power of local incomes, China will be larger than the US by 2017.
However, despite the rapid growth and the hundreds of millions of people lifted out of poverty, China remains a relatively poor country. In the World Bank’s rankings of GDP per capita for 2007 using purchasing power parity, China was in 122nd place on $5,370, behind Egypt, El Salvador and Armenia.
According to the IMF, Germany’s GDP was $3,321bn in 2007, using market exchange rates for that year, while under the new estimate China’s GDP was $3,382bn. US GDP was $13,807bn and Japan $4,382bn. China is also close to surpassing Germany to become the biggest exporter in the world.
This was the second time that China had revised upwards growth figures for 2007 GDP, which was initially calculated at 11.4 per cent. The revision will reinforce suspicions that the Chinese authorities massage the figures to underplay the volatility of the economy, exaggerating growth when conditions are tough and underestimating when the economy is booming.
Germany’s economy has also slowed sharply and may have contracted by as much as 2 per cent in the fourth quarter, the country’s statistical office said on Wednesday. SOURCE: Financial Times