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By Scott Hillis
BEIJING, Jan 20 (Reuters) - China's racing economy accelerated late last year, beating expectations and fanning worries that it may be in danger of overheating in 2004, with the government forecasting sustained momentum in the current quarter.
Gross domestic product surged 9.9 percent between the fourth quarters of 2002 and 2003, the government said on Tuesday, and for the full year showed growth of 9.1 percent from the previous 12 months, its fastest clip since 1997.
The stellar data firmly positioned China as the world's fastest-growing major economy. Also the world's sixth-biggest economy, China has become an increasingly important source of demand for exports from Asia and the rest of the world.
The growth came despite of the ravages of the deadly SARS virus, which thumped consumer spending, foreign investment and factory output after emerging in southern Guangdong province in late 2002 before spreading alarm across the globe last year.
The full-year result for 2003, 9.1 percent, was far higher than the 8.5 percent stated by China's tax chief last week and average expectations of 8.6 percent growth presented in a Reuters poll of economists.
In its first ever revision of gross domestic product data, the statistics bureau said third-quarter economic output had been 9.6 percent higher than a year earlier, rather than the 9.1 percent originally reported.
Second-quarter GDP was up just 6.7 percent on a year earlier, the government said in July, so the latest data shows powerful acceleration in the second half of the year.
"It was a hard-won successful achievement after the outbreak of the SARS epidemic and frequent natural disasters," said state statistical bureau head Li Deshui, referring to the full-year growth figure.
China would keep up the momentum of fast growth in the first quarter, buoyed by fairly high investment and consumer demand, but export growth was likely to slow, Li told a news conference.
Many economists see the growth rate tailing off this year, as steps taken to cool lending to key sectors, such as property, last year continue to have an impact.
"We are forecasting a bit more of a slowdown in 2004 against the background of the new full year number but we think the drivers of very rapid growth remain in place," said Tim Condon, chief Asian economist at ING Financial Markets.
OVERHEATING RISKS?
China's economy has roared ahead, fanning fears among some economists over over-investment in key sectors such as property and automobiles.
This year Beijing is expected to ease back on state spending and take further steps to cool lending to industries seen in danger of overheating.
"They have taken a real specific measures approach. They look at where signs of overheating are really clearest and act in those parts of the economy," said ING's Condon.
"I think the authorities will manage to convince themselves that they have the situation under control and not take measures that are going to slow growth sharply at all," he said.
Not everyone believes that overheating risks are clouding China's outlook. Goldman Sachs is one example, currently forecasting China's 2004 GDP will be up as much as 9.5 percent.
In all of 2003, fixed asset investment -- a key source of concerns over overheating -- showed growth of 26.7 percent.
Driven by rising food prices more than offset falls in the price of most manufactured goods, consumer prices were up 1.2 percent.
Most economists say inflation in the low or middle single digits is not a problem for China, which has grappled with mild deflation in recent years.
Strong exports and a flood of foreign investment have also helped power China's economy.
Exports surged last year by nearly 35 percent. Foreign direct investment, while barely growing over 2002's level, still topped more than $53 billion. (Additional reporting by Tamora Vidaillet and Godwin Chellam)