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china aims for 10% growth

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    From todays Australian

    CHINA has set the ambitious target to grow its economy by 10 per cent next year, by maintaining government investment and low interest rates, while rejecting growing international demands to stop holding down the currency.

    The strategy will reap more dividends for Australia's mining sector, as demand will stay high for raw materials. But it is expected to create headaches for global economic policymakers, as China vows not to be "bullied" into appreciating the yuan "in any form".

    Chinese Premier Wen Jiabao said yesterday the national economy had improved and was back on track to reach the growth target in the year ahead.

    "Our mood was very heavy. We didn't know how much this disaster (the financial crisis) could hurt the Chinese economy or how long it would last," Mr Wen said in an extensive interview with state-run newsagency Xinhua. "We have stabilised the economy and employment and maintained social stability over the past year, which is a comfort to me."

    The Premier said the central authorities had no plans to change the management of the yuan, which had earlier helped the country through the 1998 Asian financial crisis and contributed to the global recovery in that time.

    "A stable Chinese currency is good for the international community," Mr Wen said.

    Mr Wen reiterated his long-standing mantra that China's growth profile needed to change. The Chinese economy has grown at 8.5 per cent over the past year.

    "It is a structural problem for China's economy which is still unbalanced, unco-ordinated and unsustainable," he said, reinforcing broad policy statements made by China's ruling Politburo on November 27 and by its annual Economic Working Conference earlier this month.

    Economists see China's policy of artificially depressing the currency as a form of protectionism as it makes the country's export goods cheaper compared with those of other nations, handing it a competitive advantage.

    "China will work together with other countries to curb trade protectionism and push forward with the Doha Round trade negotiations," Mr Wen said.

    Analysts have given much of the credit for the buoyant Australian economy to strong trade links with China that this year returned to its position of No 1 trading partner and became Australia's largest export market. Bullish forecasts by China for growth in commodities demand next year augur well for the local resources sector.

    One of China's top steelmakers, Wuhan Iron & Steel Group (Wugang), said at the weekend it planned to boost production by 24 per cent next year as demand recovered and the economy continued to strengthen.

    Wugang expected to produce 37.9 million tonnes of crude steel next year, up from a forecast of 30.5 million tonnes this year, the company said.

    The group portrayed 2009 as the toughest year in the company's history. But despite government concerns about industry overcapacity, it will go ahead with its 10 million tonnes steel project in the Guangxi Zhuang autonomous region and expects steel output across China to climb by 10 per cent next year.

    "Domestic demand for coking coal will rise moderately next year, while global demand may gain faster, intensifying competition," China Coal Transportation and Distribution Association senior adviser We Chunghao said in a recent interview.

    With a massive surge in Chinese demand for coking coal during 2009, and Chinese companies viewing Australian coal producers as acquisition targets, analysts are predicting prices may jump by as much as 38 per cent next year.

    "Australia is by far the best-placed advanced economy to benefit from Asia's burgeoning demand for commodities, which on our forecasts shows no sign of abating," said Nomura's Australian chief economist, Stephen Roberts.

    Already, more than 70 per cent of Australia's exports are destined for Asia, more than 20 per cent to China alone.

    But China's strong growth next year will depend on new investment rather than booming exports, which have underpinned the 17-year success story that stalled late last year.

    "Some indicators (for example GDP growth) in China are returning to the pre-crisis level, but some may never make it to these levels again. External demand growth, for example, is unlikely to return to the levels seen in past years," Citi economists Minggao Shen and Ken Peng said.

    "China's post-crisis growth will have to be different. Investment will continue to be the key contribution to growth in 2010 and beyond, and GDP growth could accelerate even further in the mood of recovery next year. However, in the medium to longer term, China's growth will have to be constrained by the expansion of domestic consumption."
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