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China's economic growth quickens in fourth quarter

The nation's GDP expands 9.8%, up from 9.6% growth in the third quarter. The numbers underscore the difficulty that Beijing faces in trying to cool the economy.

January 20, 2011|By David Pierson, Los Angeles Times

Reporting from Bejing — The pace of China's economic growth increased during the final three months of 2010, defying market expectations and underscoring the difficulty that policymakers face in trying to cool the world's second-largest economy.

The National Bureau of Statistics of China said Thursday that the nation's gross domestic product grew 9.8% in the fourth quarter compared with the same period a year earlier. That's more than the 9.6% growth registered in the third quarter, despite central government efforts to rein in the property market and restrict bank lending.

The unexpected pace of growth could compel the central government to issue more interest rate hikes in the coming months and reduce the amount of lending permitted by the nation's banks.

The strong economic numbers arrive while Chinese President Hu Jintao is conducting his second and final U.S. state visit. In a sign of the contrasting trajectories of the two nations, Hu is struggling to put the clamps on an overheated economy while President Obama leads a country still grasping for recovery.

For the year, China's economy expanded 10.3%, 1.1 percentage points higher than in 2009.

China's closely watched consumer price index fell in December from a month earlier, signaling that price controls and the release of food reserves may have temporarily succeeded in cooling inflation. The index grew 4.6% compared with a year earlier, down from November's 5.1%, which marked a 28-month high.

Part of America's frustration is directed at China as Hu is facing criticism from U.S. lawmakers and manufacturers over unfair competition. Chief among their complaints is an undervalued currency, weak copyright protections and diminishing market access for foreign firms.

Despite overtaking Japan's economy in size last year, China still sees itself as a developing nation that requires overarching state controls.

Citing the global financial crisis, China stimulated its economy with record amounts of bank lending starting in 2009. Although that led to a robust, investment-led recovery, China now faces the threat of real estate bubbles and rising consumer prices. Both weigh heavily on the minds of Chinese leaders because of their potential to sow social unrest.

The central government's 2010 inflation target of 3% was surpassed by 0.3 percentage points, according to the data released Thursday.

This year's inflation target has been set for 4%, but many economists say it will be difficult to meet unless China takes more tightening measures and is resigned to accepting slower growth.

david.pierson@latimes.com

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