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China's Reports Economic Growth - 2003-02-28

China says its economy grew at a roaring eight percent last year.

Officials say China's Gross Domestic Product topped $1.2 trillion last year.

Chief statistician Zhu Zhixin says that is a record, and an eight percent increase over the previous year. China is now the world's sixth largest economy, ranking just behind France.

The eight percent growth in GDP, the total of all goods and services produced by the economy, topped the increase of 7.3 percent the year before. Officials say growth was helped by state spending, exports, and foreign investment.

Experts say China requires at least seven percent growth per year to create the millions of jobs it needs for workers laid off from bloated state-owned companies, and for impoverished farmers leaving the land to seek work in the cities.

Officials say they will sustain the growth by boosting domestic demand. Retail sales were up by nearly nine percent last year, as the Chinese snapped up mobile phones and bought more cars.

Still, economists say that economic problems are looming. Deflation is one: the consumer price index fell 0.8 percent for the year. Deflation can hurt economic growth by boosting the real cost of loans and discouraging investment in new equipment.

The other looming problem is the possible war in Iraq, which could raise oil prices. That would increase the cost of manufacturing, and make it more expensive to ship the exports that are a major factor in the country's growth.

Economists expect China's growth rate to slow a bit next year as the export sector cools, and as the government cuts spending on fixed assets, which have been fueling some of the robust growth.