Associated Press
BEIJING -- China declared it is over the global crisis and signaled a shift in focus to controlling inflation, sparking concern it could hamper growth and the country's contribution to a worldwide rebound.
Economic growth accelerated to 10.7 percent in the final quarter of 2009, the government said Thursday, beating most forecasts and driving the full-year expansion to 8.7 percent. But inflation also picked up, driven by a jump in food costs amid a torrent of stimulus spending and bank lending.
The strong numbers keep China on a course to replace Japan sometime later this year as the world's second-largest economy after the U.S.
Chinese leaders say the fiscal largesse will continue this year but have ordered banks to curb credit after a surge in 2009 to a record 9.5 trillion yuan ($1.39 trillion) in new loans. They worry that reckless lending has fueled overinvestment in some industries such as steel and cement and a possible bubble in stock and real estate prices, which are up sharply.
Most Asian stock markets dropped as investors worried whether Beijing can prevent overheating without hurting recovery in what is now the world's third-largest economy. Hong Kong's main index lost 2 percent.
"The Chinese authorities seem to be juggling knives at this juncture. Let's hope they don't cut themselves or drop the knives on the audience," said Thomas Lam, chief economist at financial services firm OSK-DMG in Singapore.
A solid Chinese recovery could help to drive a global rebound by boosting demand for imported oil, industrial raw materials and consumer goods. But inflation could disrupt that by eroding consumer spending power and pushing up the price of China's exports, hurting sales and demand for imports used to produce them -- factory machinery from the United States, Germany and Japan or iron ore from Australia.
"We need to prevent overly fast price increases and closely watch the trend in consumer inflation," said Ma Jiantong, commissioner of the National Bureau of Statistics, at a news conference.
Inflation is politically sensitive in China, where it can erode the rising living standards that underpin the ruling Communist Party's claim to power.
