China's GDP Growth Tops 10%
The fact that they now admit that growth is over 10% could either indicate an increased willingness to make their statistics honest-or that real growth have increased so much that they would lose all credibility were they continue with their just below 10% numbers.
Chinese leaders have for long set out 7 to 8% as the target for growth, yet these numbers have almost always been exceeded, apart from the slowdown associated with the financial crisis in the rest of Asia in the late 1990s. This indicates that the Chinese private sector is far more productive and innovative than the politicians.
President Hu commented the numbers by expressing concern that growth is too fast. Actually it's not the fast growth per se that should concern them, but the extent to which growth is driven by cheap credit, as is indicated by the rapid money supply and
credit growth in China. The money supply growth figures is actually not as bad as a similar numbers in the West would be, as it is only natural to have higher money supply growth in faster growing regions. If separate money supply figures were
being kept for Detroit and Las Vegas, Las Vegas would certainly be shown to have far higher money supply growth and there would be nothing wrong with that. However, at nearly 18%, money supply growth is too high to be attributed solely to the naturally higher growth rates in economically expanding regions. Clearly, we are seeing real inflationary excesses, something which is expressed in over-capacity in some industries.
This is yet another reason why it would be wise for China to give in to U.S. demands and revalue their currency at a much faster pace than we have seen in recent months. A stronger currency would allow for interest rates to rise in China and thus contain the inflationary excesses.