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Economic growth in China sizzling

Chinese construction workers come out of part of the China World Trade Center construction site, seen in the background, in Beijing, China Thursday. Associated Press (Associated Press / The Spokesman-Review)
Don Lee Los Angeles Times
Chinese construction workers come out of part of the China World Trade Center construction site, seen in the background, in Beijing, China Thursday. Associated Press (Associated Press / The Spokesman-Review)

SHANGHAI, China – China’s economy grew at an extraordinary rate of 11.9 percent in the second quarter, the fastest clip in more than 12 years and a pace that puts the nation on track to overtake Germany this year as the world’s third-largest economy.

For the last 35 years, the United States, Japan and Germany have ranked 1-2-3 in gross domestic product, but as growth in those mature economies has slowed, China’s has accelerated, powered by foreign investments and trade amid a global shift in production activity to the East. Just 12 years ago, China’s economy ranked No. 8, behind Brazil, and was less than one-third the size of Germany’s.

But the figures released Thursday show increasing challenges ahead for Beijing: surging inflation, breakneck investments in factories and a dramatic jump in exports that is stoking tensions between China and its major trading partners, particularly the United States. For the first half of the year, China’s trade surplus with the rest of the world reached $115 billion, up 85 percent from a year ago.

In recent months, the U.S., Japan and Mexico have filed or joined complaints with the World Trade Organization that accuse China of illegally subsidizing exporters. Washington has also taken China to the WTO over piracy issues, and members of Congress are threatening to impose hefty tariffs on Chinese imports if Beijing doesn’t change its currency policy, which some believe gives China an unfair advantage in global market.

Analysts said the latest statistics signal an overheating Chinese economy that will likely prompt the government to raise interest rates and take other measures to slow growth. But rate hikes in the past and other top-down controls have had little effect.

In the second quarter, China’s gross domestic product, or total value of goods and services generated, expanded by 11.9 percent from a year earlier, far higher than expectations and ahead of the 11.1 percent increase for all of last year. By China’s calculations, its GDP in 2006 was about $2.7 trillion. Germany’s was $2.9 trillion, based on International Monetary Fund data, but its economy, like those of the U.S. and Japan, has been growing at a fraction of China’s. The U.S. remains far ahead of the rest of the world in GDP, with $13.2 trillion in 2006.