Gross domestic product expanded 10.7 per cent between October and December, compared with a year earlier, roughly meeting market expectations, and up sharply from 8.9 per cent in the third quarter.
"Obviously the month-on-month growth momentum is very strong," said Xing Ziqiang, an economist at CICC in Beijing.
"So I think the chances for us to see an interest rate rise in the first quarter are increasing."
For all of the year, the economy grew 8.7 per cent.
That handily exceeded the official target of 8 per cent, a goal deemed the minimum needed to preserve social stability and one that some sceptics dismissed as fanciful well into 2009.
Initial market reaction to the figures was muted. Shanghai shares were up 0.3 per cent in mid-morning.
The fourth-quarter flourish was flattered by a low base of comparison in the same period a year earlier, when China's export-orientated economy was dragged down by the global financial crisis, costing more than 20 million migrant workers their jobs.
But the double-digit growth is also testimony to the government's rapid response to the downturn, which reached its peak in the second quarter.
A 4 trillion yuan ($US585 billion) fiscal stimulus package was complemented by an unprecedented surge in lending by the nation's predominantly state-owned banks, ensuring that China was the first major economy to recover decisively from the credit crunch.
Indeed, banks have been lending so freely of late that policymakers have turned their attention to nipping inflation in the bud.
The National Bureau of Statistics, which released the GDP figures, also reported that consumer prices rose 1.9 per cent in the year to December, a marked acceleration from November's reading of 0.6 per cent.
Inflation alert
Alarmed by a new burst of credit at the start of January, the central bank last week increased the proportion of deposits that banks must hold in reserve, rather than lending out, and followed through this week by ordering some of them to sharply curtail lending for the rest of the month.
After today's batch of generally strong data, economists said it was only a matter of time before Beijing tightened monetary policy further.
"The overall macro picture is one of continued strength in activity growth and rapidly rising inflation. We believe further policy tightening measures over and beyond what has already been implemented are needed in order control inflation in the coming months," said Yu Song and Helen Qiao of Goldman Sachs in a note.
So far China has resisted international pressure to let the yuan resume its rise after an 18-month pause, but expectations are growing that Beijing will relent in coming months.
"Yuan appreciation is likely to resume in March or April, though the rise will be gradual, say about 3-5 per cent a year," said Xing at CICC.
A stronger exchange rate would damp down inflation and encourage domestic demand, thus helping to rebalance the Chinese as well as the global economy.
China has already taken a slew of steps to spur spending, including subsidies for rural buyers of domestic appliances and tax breaks on fuel-efficient cars, a measure that helped China to overtake the United States in 2009 as the world's largest car market.
Retail sales grew 17.5 per cent in the year to December, accelerating from 15.8 per cent in November and compared with forecasts of a 16.4 percent rise.
Industrial production growth slowed to 18.5 per cent from 19.2 per cent, undercutting market forecasts of a 20.0 per cent increase.
Growth of 8.7 per cent in 2009 fell short of the previous year's rate of 9.6 per cent, but economists polled by Reuters expect a rebound this year to around 9.5 per cent.
That would be enough for China to relegate Japan to number three in the world economic rankings. Goldman Sachs expects China to eclipse the United States as the biggest economy in the world by 2027. - Reuters
Source:solomonstarnews.com/
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