A Matter of Time
July 20, 2007
China's booming economy sped up to 11.9 percent in the second quarter of the year, achieving its fastest growth rate since 1995, according to data released by China's National Statistics Bureau on Thursday.
If China's gross domestic product fulfills predictions, it will be the fifth consecutive year of double-digit growth.
"These numbers show that China's growth actually accelerated in the second quarter," Standard Chartered economist Stephen Green told AP. "The key question is, how sustainable is all this?"
Though some economists have said China will only replace Germany behind the USA and Japan in the list of the world's largest economies, earlier this week Green said that "probably happened a few months ago."
The Federation of German Industries' head Klaus Bräunig also said Thursday that if China hasn't surpassed Germany yet, it will happen by the end of the year -- despite the 2.8 percent growth the federation expects to come from Germany this year.
"In comparison with China we're a small country," Bräunig said. "What's important is that we are growing in comparison with our competitors."
A market for German exports
Germany could benefit from the overall strength of China's economy, which expanded by 11.5 percent in the first half of 2007, according to Allianz and Dresdner Bank head analyst Michael Heise.
"We should see this as a chance to develop a larger sales market for German products," he told Berlin's Tagesspiegel newspaper, adding that according to his calculations, China would have to wait until at least next year before its GDP is larger than Germany's.
Discrepancies in the calculations are mainly due to varying exchange rates banks and other groups use to calculate an economy's size. But rather than looking at their international rank, China should be concerned with its economy overheating, according to several analysts.
Crash on the horizon?
"It's stunning," Tim Condon, head of Asia research at Dutch bank ING in Singapore told Reuters. "We should expect them to raise interest rates or reserve requirements at any moment."
China National Statistics Bureau spokesman Li Xiaochao said a series of cooling measures this year, which included two interest rate hikes, had already had some impact but the government needed to do more.
"We will continue to strengthen and improve macro-control measures," Li said at a press conference. "We will continue to enhance the adjustment of the industrial structure to change the growth pattern and to enable the economy to grow healthily and quickly."
China surpassed Britain to become the world's fourth largest economy in 2005 and has been at Germany's heels since. The World Bank listed China's GDP at $2.7 trillion, slightly behind Germany's $2.9 trillion.