China's growth outstrips forecast

staff and wire reports

It's not clear what is causing the deflation plaguing China, but uncertainty may encourage saving

Story Tools

BEIJING, China -- China's economy grew 8.1 percent in the third quarter, the State Statistical Bureau reported, setting growth for the first nine months of the year at 7.9 percent.

That's above the government's own target. But China repeated its official forecast of 7.8 percent growth for the year.

"We expect the whole year growth to reach around 7.8 percent," bureau spokesman Yao Jinguan told reporters.

China's economy grew to 7.17 trillion yuan ($866 billion) for the first nine months of 2002. That's $1.15 trillion, when annualized.

Strong exports, rising overseas investment and an increasingly consumer-oriented culture are driving China's expansion.

China posted a trade surplus of $20.0 billion for the first nine months, the data showed, with exports up 19.4 percent.

Industrial output is also rising, while new figures show China drew $39.6 billion in foreign direct investment in that period, up 22.6 percent. (Full story)

Deflation a problem

But there are problems in Asia's fastest-growing economy. For instance, China is still battling deflation, like much of Asia.

The consumer price index fell 0.8 percent for ht first nine months of the year, the bureau said, with a 0.7 percent fall for September and August.

Retail sales rose 8.7 percent for the first nine months but missed the official target of 9 percent growth.

The reason for the deflation isn't clear, with some experts pointing to industrial overcapacity and others noting uncertainty over the country's industrialization and shift to a market economy.

Inefficient state-run companies are attempting to recast themselves in a process that often costs jobs. That may be encouraging Chinese to save.

Many farmers are also expected to lose their livelihood as the country opens up under World Trade Organization rules.

Nikkei rebounds to above 10,000 • Japan talks trade at ASEAN summit • Japan-Thailand move on trade talks • China, U.S. lead oil demand boom

CNN/Money: Security alert issued for 40 million credit cards • Bin Laden deputy sends message • U.S. House votes to keep U.N. dues • Iran poll to go to run-off