Emerging Markets : Economy Set To Pass Germany’s



Pro-Tibetan protests have dogged the run-up to the Beijing Olympics.

China upwardly revised its 2006 and 2007 gross domestic product (GDP) growth numbers, pushing the country closer to surpassing Germany to become the world’s third-largest economy. According to China’s National Bureau of Statistics, China produced 24.95 trillion yuan ($3.57 trillion) in goods and services in 2007, an increase of 11.9% over 2006. The growth rate for 2006 was also revised upward by 0.5 percentage points to 11.6%. Germany has not yet released its official 2007 GDP statistics, but estimates place the size of the German economy in 2007 at $3.8 trillion.

Chinese monetary authorities have allowed the pace of the Chinese yuan’s appreciation to accelerate in recent months, passing the seven-to-one dollar-to-yuan threshold in early April. China’s exchange rate policy, which fixes the yuan’s value to a basket of currencies according to an undisclosed formula, has been a source of controversy in recent years, with some trading partners accusing China of keeping the yuan’s value artificially low to encourage exports. The more rapid appreciation in recent months should silence some criticism, but authorities are unlikely to allow the yuan to float freely in the near future.

Retail sales in China grew at the fastest rate in at least nine years in January and February, increasing by a fifth over the same period last year. The stronger retail growth may help offset falling export growth as the global economy cools. Spending on food, petroleum products, and gold and precious metals contributed much of the increase, however, indicating that inflation, which also was high in January and February, may be responsible for much of the higher retail spending.

China’s Olympic summer got off to a bumpy start after protests interrupted the Olympic torch’s 85,000-mile journey through 20 countries. International attention has turned more intensely to China’s human rights record after the largest demonstrations in Tibet in decades resulted in destruction and violence in March. In the days following the demonstrations, authorities prevented journalists from entering Tibet and several Tibetan regions in surrounding provinces, fueling fears of a harsh government crackdown on Tibetan protesters. The torch’s journey, the longest in Olympic history, is triggering huge demonstrations of both criticism and support for the Chinese government.

Thomas Clouse