China set to pass Japan as growth rises 10.7%

CHINA’S economy has moved back to double digit growth of 10.7% in the last quarter of 2009.

It is set to take over from Japan as the second largest economy after the US if current trends continue.

Last year it achieved overall growth of 8.7% in 2009 after the strong last quarter spurt meant it beat its own internal growth targets.

The strong figures impacted on currency markets and the yen dropped against the higher-yielding Mexican peso and Australian dollar.

China’s return to double digit expansion has been helped by a massive $586bn (€415.8bn) of fiscal stimulus topped off with new bank lending of $1.2trillion.

Japan is expected to have contracted by 6% in 2009, paving the way for China to become the second largest economy after the US.

Ma Jiantang, head of the National Bureau of Statistics, at the launch of the new growth figures, warned of “severe difficulties” encountered over the past year.

“Despite the increase in GDP and economic strength, we must see even more clearly that we remain a developing country”, he said.

Concerns exist that the country may now be expanding too quickly, with Mr Ma reporting a 1.9% increase in consumer prices for December year-on-year, more than double the November figure.

Figures published by Davy Research suggest global growth is about to resume.

Donal O’Mahony, the group’s global strategist said markets were exiting 2009 in “far better shape than they were in entering it.

“The credit crisis is over; financial market conditions are progressively improving; and such improvement is providing the foundation for the economic recovery now underway”, he said.

He warned that an “acute sense of insecurity” surrounding the recovery story was prevalent still among investors, financial institutions, households and policymakers.