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BEIJING : China's red-hot economy expanded by 8.7 percent in 2009 but inflation surged towards the end of the year, according to government data released Thursday that laid bare the risks of overheating.
Gross domestic product in the world's third-largest economy returned to double-digit growth in the fourth quarter of 2009 at 10.7 percent, and surpassed the government's target of eight percent for the year.
That target is seen as crucial to foster job creation and stave off social unrest in China's population of 1.3 billion people. Analysts said China was on track to overtake Japan as the world's number two economy. Related article: China could overtake US by 2020, says PWC
But China's biggest rise in inflation in 13 months underlined the broader challenges of breakneck growth, and came as the World Bank and International Monetary Fund warned anew that the country could face an economic bubble. Related article: World bank sees 'signs of bubbles' in China economy
"The year 2009 was the most difficult time for China's economic development in the new century," Ma Jiantang, commissioner of the National Bureau of Statistics, told a press conference.
Ma said a government stimulus package worth four trillion yuan (586 billion dollars) "held back the economic decline and achieved the recovery and rebound of the national economy", as the global economy went into a tailspin.
"We need to prevent the overly fast increases in prices and keep a close eye on the trend in prices," the official added, but said he believed inflation in 2010 should be "mild and controllable".
China's consumer price index, the main gauge of inflation, rose 1.9 percent year-on-year in December. Authorities are already clamping down on bank lending and hiking borrowing costs to keep a lid on price pressures.
"Policymakers will need to move soon to stop the economy from overheating," said Brian Jackson, a Hong Kong-based strategist at Royal Bank of Canada.
"We have already seen some initial steps in the direction of tighter policy, but higher rates and a stronger currency will also be part of the package."
China's urban fixed asset investment, a measure of government spending on infrastructure and a key driver of the economy, rose 30.5 percent in 2009 while overall fixed asset investment rose 30.1 percent, Thursday's data showed.
Industrial output from China's millions of factories and workshops rose 18 percent in the fourth quarter, and 11 percent for all of 2009.
Retail sales jumped 15.5 percent in 2009.
This week, Premier Wen Jiabao signalled that Beijing was carefully monitoring the risks associated with its hefty pump-priming of last year.
"We must ... closely watch changes in supply and demand in the market, form an accurate judgement of the situation and increase the precision and effectiveness of macroeconomic policies," he told a cabinet meeting.
Wen's comments signalled a break from the government's oft-stated goal of maintaining stability in macroeconomic policy, and could have broader repercussions for a world economy increasingly reliant on Chinese growth.
The 10.7 percent growth in the final quarter of 2009 was the best result since the second quarter of 2008.
It followed revised growth of 9.1 percent in the third quarter, 7.9 percent in the second quarter and a revised 6.2 percent in the first three months of last year.
The full-year figure exceeded analyst expectations, but was down from 9.0 percent in 2008 and was the slowest full-year increase in eight years.
IHS Global Insight economist Ren Xianfang said she expected China to grow by 9.9 percent in 2010 and soon overtake Japan in the global economic rankings.
"I think it will happen this year," Ren told AFP. Japan releases its own GDP data for the fourth quarter of 2009 on February 15.
- AFP /ls
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