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China Embraces Fast Growing Economy With Risks, Unrest, Pollution in 2007 

China continues to be one of the world's fastest growing economies, but in the past year, it faced many worries and criticisms ranging from concerns about inflation, social stability and environmental degradation to global complaints about the safety of Chinese-made goods. Eight months before the Beijing Olympics, when the eyes of the world will be on China, Claudia Blume at VOA's Asia News Center in Hong Kong takes stock of major trends and events that happened in the country in 2007.

China's economy stormed ahead in 2007, growing by more than 11 percent for most of the year. The growth was led by exports and investments in fixed assets, such as factories and roads. To keep its economic engine running, China continued its global shopping spree for oil, gas and commodities such as metals, driving up world prices.

China's stock market also rose, with the benchmark Shanghai Composite Index gaining about 18 percent. The initial public offering of China's largest oil and gas producer PetroChina, raised almost $9 billion in October, making it the country's largest domestic share offering to date.

However, some market experts think the boom is a bubble. David Webb, an independent market analyst in Hong Kong, says he is worried about a lack of economic fundamentals behind the gains in stock values.

"When people eventually realize that the emperor is not wearing any clothes then the markets tend to crash or at least to correct, whether it happens suddenly or over a period of time varies," said Webb.

Chinese officials also worry that the growing inflow of foreign cash could lead to economic overheating and inflation. The president of China's National Economic Research Institute, Fan Gang, said in November that so-called hot money from China's huge trade surpluses and foreign investment adds pressure to the economy.

Fan says as a developing country, these rapid inflows of money can easily produce all kinds of bubbles, crises and imbalances. He warns that the domestic economy can become unstable and suffer inflation.

The latest economic figures underscore those fears. China's inflation reached an 11-year high in November, with consumer prices rising nearly seven percent from a year earlier. The trade surplus in the first 11 months reached a record $238 billion, leading to friction with trade partners, such as the United States and the European Union.

The gains mean exports were little affected by a global outcry about health hazards posed by a number of Chinese products including tainted toothpaste, medicines and pet food, and faulty toys.

Manufacturers, however, say foreign consumers are part of the problem, as they expect to pay low prices for Chinese products, forcing factories to take short cuts.

Paul Yin, a vice president of the Chinese Manufacturer's Association of Hong Kong, says the financial pressures for manufacturers are mounting, making quality control difficult.

"When the costs are higher and our selling price cannot be increased, what is our choice? It's a fact that many factories sub-contract their work outside because of the cost factor, want to keep costs as low as possible, and many sub-contractors could use sub-standard material, making products below the required standard," explained Yin.

After initially denying the accusations, Beijing started to address product safety. More than 700 toy factories in southern Guangdong province alone have been closed because of shoddy practices, for example. In July, the head of China's State, Food and Drug Administration, Zheng Xiaoyu, was executed after he was found guilty of taking bribes to approve fake and substandard drugs.

Beijing also has become increasingly concerned about social problems that have arisen from two decades of rapid economic growth, as the legitimacy of the country's one-party rule is based largely on stability and development.

When the Communist Party held its congress in October, the country's leaders, including President Hu Jintao, talked about reducing the income gap between rural and urban residents and halting rampant corruption and environmental degradation. Poverty, corruption and pollution have contributed to thousands of protests and demonstrations across the country.

Sujian Guo is a political science professor at San Francisco State University in California, and director of the Center for U.S.-China Policy Studies.

"Hu has recognized the major challenges and problems [that] accumulated in the past years," said Guo. "That is, the single-minded pursuit of economic growth, which has some negative impact on society, on the environment."

In China's capital Beijing, the severe pollution is particularly noticeable, and an international headache for the country's leaders. The government committed more than $12 billion to reduce pollution in Beijing for the Olympics next year. Although Beijing has built subways, shut factories and planted trees, a United Nations' report says the bad air will not significantly improve before the games. The International Olympic Committee warns air pollution could force the delay of some outdoor events.

This is not the only criticism China's leaders face ahead of the Olympics. Several international rights groups have criticized Beijing for failing to honor promises to improve human rights and media freedom before the games.

This year brought increasing calls for a boycott of the Olympics to push Beijing to use its leverage on Sudan's government to help end violence in the Darfur region. China is the largest buyer of Sudan's oil and a veto-wielding member of the United Nations Security Council, and therefore in a unique position to put pressure on Khartoum to halt the civil war in Darfur.

Beijing maintains, however, that politics has no place in the Olympics.

But the international pressure seems to have some effect. In May, Beijing appointed a special Africa envoy whose first task was to focus on the conflict in Darfur.