China's Economy Expanded at About 10% Pace in 2010, Vice Premier Li Says

China’s economy expanded at about 10 percent in 2010, according to an estimate by Vice Premier Li Keqiang reported by the official Xinhua news agency, a pace forecast to slow as policy makers seek to stem inflation.

Li, on nine-day tour of Spain, Germany and the U.K., also estimated that retail sales in the world’s most populous nation climbed 18.5 percent last year from a year earlier, Xinhua said, citing a transcript of comments he made to business executives during a visit to Madrid on Jan. 5. China is maintaining stable and relatively rapid growth, Yi Gang, a deputy governor at the central bank, said in a statement on the bank’s website today.

China overtook Japan to become the world’s second-largest economy in 2010, according to forecasts by the International Monetary Fund, after already taking the title of largest exporter the previous year from Germany. The country has grown at an average 11.4 percent pace over the past five years and the nation’s top economic planning agency last month pledged to ensure “stable and relatively rapid” development in 2011.

“How to maintain the high growth but keep inflation expectations in check will be the key test for policy makers in 2011,” Shen Jianguang, a Hong Kong-based economist at Mizuho Securities Asia Ltd., wrote in a note to clients yesterday. “We expect economic growth to become more balanced,” with an increasing role for consumer spending, Shen wrote.

PBOC’s Estimate

Vice Premier Li gave the same forecasts to business people in Berlin yesterday, according to a separate report on the website of the China Daily newspaper today. His estimate for 2010 growth is the same as that given by central bank Governor Zhou Xiaochuan on Dec. 15 in a speech at Peking University, according to a transcript posted on the bank’s website on Jan. 5.

“China still faces arduous tasks in its development and must continue to expand trade and investment with other countries to ensure further growth,” Li told business people in Spain, according to Xinhua.
Some 90 percent of China’s economic growth was driven by domestic demand last year, Li told executives in Berlin, the China Daily reported. Ford Motor Co. said today its vehicle sales in China, the world’s largest auto market, jumped 40 percent to a record 582,467 last year.

The median estimate of 18 economists in a Bloomberg survey is for growth of 10.1 percent in 2010. Expansion will slow to 9 percent this year, still three times the rate of the U.S. and six times the speed of the euro zone, Bloomberg surveys show. The International Monetary Fund estimated in October that China’s economy would grow by 9.6 percent in 2011.

Li is thought to be the front-runner to succeed Premier Wen Jiabao in 2012, according to Li Cheng, director of research at the Brookings Institution’s John L. Thornton China Center in Washington.

--Nerys Avery, Huang Zhe, Kevin Hamlin. Editors: Chris Anstey, Ken McCallum

To contact Bloomberg news staff for this story: Nerys Avery in Beijing at +86-10-6649-7558