Fast China growth builds huge reserves

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BEIJING China’s sizzling economy grew even faster in 2006 than previously reported, bringing it closer to overtaking Germany as the world’s third-biggest, and its export-fueled foreign reserves have risen to a new high of $1.33 trillion, according to official figures released today.

The announcements reflect China’s stunning success but could fuel fears of overheating and prompt Beijing to boost interest rates or tighten economic controls to cool the boom.

The National Bureau of Statistics raised its estimate of China’s 2006 growth rate from 10.7 percent to 11.1 percent. It nudged up its estimate of total output to $2.705 trillion, bringing China closer to overtaking Germany as the world’s third-largest economy after the U.S. and Japan.

Chinese leaders want to maintain fast growth to reduce poverty but are trying to slow investment in auto manufacturing, real estate and other areas where supply outstrips demand. They worry that runaway spending could ignite inflation or leave banks and borrowers with dangerously high debt levels.

In the most recent official forecast, the central bank’s research bureau said last month that the economy was expected to expand by 10.8 percent this year. That was in line with projections by the World Bank and other economists, and would be China’s fifth straight year of growth in excess of 10 percent.

Today’s revision confirmed the opinions of foreign economists who said the earlier figure seemed too low, suggesting the economy was slowing despite surging exports and other indicators.

The change comes amid reports of double-digit growth in industrial output, investment and other economic indicators.

China’s trade surplus soared to a new monthly high of $26.9 billion in June, the government reported yesterday. That was despite official efforts to narrow the ballooning trade gap by repealing rebates of value-added taxes on exports.

The flood of export revenues has forced the central bank to drain billions of dollars a month from the economy through bond sales to reduce pressure for prices to rise, piling up the money in U.S. Treasury notes and other foreign securities and helping to finance Washington’s budget deficit.

The reserves, already the world’s largest, rose to $1.33 trillion at the end of June, a 41.6 percent increase over the same time last year, the official Xinhua News Agency said, citing the central bank.

The reserves soared by $266.3 billion in the first six months of this year, more than in all of 2006, the bank said.

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