China exports more to the US than Japan does

The growth rate in the final three months of last year was even more rapid, up 9.9%.

China's strong performance was due to growth in trade, foreign investment, and consumer spending.

Chinese officials are predicting a cautious 7% growth in 2004, a figure most economists expect to be beaten.

Sars pain gone

China's performance makes it the fastest growing among the world's major economies, outpacing the United States and far ahead of sluggish Japan.

It also shows that growth in the world's sixth biggest economy was not thrown off track by the Sars outbreak last Spring.

The 7 biggest economies US Japan Germany UK France China Italy Source: World Bank, July 2003

The ruling Communist Party's policy of market reform has transformed China from a poor agricultural economy 25 years ago into a global manufacturing base.

Foreign investment has soared since China opened its markets to join the World Trade Organisation (WTO) in 2002.

Foreign manufacturers have piled into the country in the hope of tapping its potentially huge consumer market, as well as its mix of cheap skilled and unskilled labour.

"There are signs of overheating in select regions and areas," said Li Deshui, director of China's National Statistics Bureau. But he added, "There is no need to slam on the brakes."

China's industrial production jumped 17% in 2003.

The picture in manufacturing is all not rosy, however, since output from inefficient state-run firms being bankrolled by the state to avoid too-rapid job cuts and instability is causing fears about the strength of China's banks.

Retail sales rose 9.1% in 2003, while disposable income rose 9.3% in urban areas and 4.3% in the countryside.

Overall growth in 2003 was better than 8.5%, the figure predicted by the head of the state tax office last week.

The statistics bureau said growth in the July to September period of 2003 was 9.6%, not 9.1% as originally thought.

China has made strenuous efforts to improve the way it collects and compiles economic data to satisfy international standards.

Wealth gap widens

Francis Markus, the BBC correspondent in Shanghai, told World Business Report that in the past, the Communist authorities had been accused of exaggerating the country's economic figures.

"Now lots of economists are saying this growth could be understated," he said.

The majority of people in places like Shanghai are much better off than they were 10 or 20 years ago.

"But what's also happening is that income disparity is opening up - between people who can afford cars and those who still have to slog around on bicycles," he said.

There is also a higher level of growth in cities than in the countryside.