The juggernaut that is China's economy expanded 9.9 per cent in 2005, beating market expectations and setting the stage for what officials say is likely to be another year of powerful growth.
Following growth of 10.1 per cent in 2004 and 10 per cent in 2003, the National Bureau of Statistics said last year's performance boosted the income per head of China's 1.3 billion citizens to £951, making the country richer than Morocco.
The data also means China, with output of £1.24 trillion, has overtaken France to become the world's fifth-largest economy and might also have leapfrogged fourth-placed Britain, depending on growth rates and currency changes in 2005.
China has kept growing strongly despite cooling measures by the government including credit curbs, tougher enforcement of planning laws and a currency revaluation.
"The economy is like a supertanker," said Stephen Green, an economist with Standard Chartered Bank in Shanghai.
"All these things should slow the economy down. But as a supertanker, it's got so much momentum behind it."
Investment, covering everything from apartments to art centres, contributed a whopping 48.8 per cent of 2005 growth.
Consumption, which the government is furiously trying to stimulate, accounted for 33.3 per cent of the increase in GDP and trade 17.9 per cent.
Statistics bureau chief Li Deshui said action was needed to brake headlong investment and avert the risks of overcapacity, which could lead to a fresh crop of bad loans, a serious waste of resources, bankruptcies and rising unemployment.
But barring policy mishaps, China's prospects were bright.
"Looking into the year 2006, the global economic environment and domestic situation are encouraging," the bureau said,
Economists agreed that China had the wind in its sails.
GDP in the fourth quarter was up 9.9 per cent from a year earlier, outstripping forecasts of a 9.7 per cent rise.
Full-year growth also beat the 9.8 per cent figure mentioned earlier this month by two senior policy makers.
Green at Standard Char-tered forecast growth of 9.2 per cent or 9.3 per cent this year, while Hong Liang with Goldman Sachs in Hong Kong reaffirmed her projection that the economy would expand 9.6 per cent this year and 9.1 per cent in 2007.
"More importantly, we believe domestic demand will increasingly become a much more important driver for growth and China will become a more positive force for global demand in the coming years," she said in a note to clients.
China is eager for stronger home-grown demand, especially by consumers, to douse the protectionist passions inflamed in Washington by the country's global trade surplus, which more than tripled last year.
Beijing revalued the yuan by 2.1 per cent in July and has since let it appreciate a further 0.6 percent against the dollar. Chris Leung with DBS
Bank in Hong Kong said the figures would increase pressure on the authorities to let the yuan climb faster.
Leung expects the yuan to rise by no more than 3 or 4 per cent this year.
"Whether that's enough for the US - well, China's exchange rate policy is not designed to satisfy other governments' needs but to maximise economic benefits in its own country," he said.
Latest figures incorporated the findings of China's first nationwide economic census, which found that output in 2004 was 16.8 per cent bigger than previously thought, mainly because services and private business had been under-reported.
Beijing is determined not to kill the goose that has laid the golden egg of annual average growth of 9.6 per cent from 1979 to 2004, lifting several hundred million people out of abject poverty.
But policy makers are increasingly aware that China's model of growth driven by exports and related investment is inflicting growing environmental damage and pushing up prices of the natural resources that feed its industrial machine.
In that context, Li, the statistics chief, flaunted a 0.5 per cent drop in China's overall consumption of crude oil and products in 2005 - a drop that contrasted with most international analysts' projections of a small rise.
"This shows that China has been making great strides towards creating an energy-efficient society. This gives me confidence that we can maintain rapid growth while reducing consumption of energy and other resources," Li said.
China's town-country income gap widened in 2005, underscoring the challenges policy makers face as they strive to bring better balance to the world's fastest-growing major economy.
Growth in per capita disposable urban incomes quickened to 9.6 per cent in 2005 from 7.7 per cent in 2004, but growth in net incomes of rural households slowed to 6.2 percent from 6.8 percent, the National Bureau of Statistics said. Policymakers are anxious to tackle the widening gap between town and country, which they fear could spawn instability.
"Boosting rural incomes is a top priority and many policies will be implemented in the near future to do something about it," statistics office chief Li Deshui said.
Already this year Beijing has scrapped China's 2,600-year-old farm tax and has promised to abolish rural school fees within two years as part of a commitment to building what the ruling Communist Party calls the "new socialist countryside".
Stephen Green of Standard Chartered Bank said he would keep an eye on whether the policy thrust translated into continued strength in public investment in rural roads, water and telecommunications. Fixed-asset investment in rural areas last year grew by 27.2 per cent, dwarfing growth of 18.0 percent in urban areas. ..SUPL: