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Thursday, April 21, 2005

China - and it runs and runs and runs

China's economy is still unstoppable, despite all the talks about bubbles, accidents and labour crunches.

"China's economy, which accounted for a 10th of global growth last year, expanded more than expected in the first quarter as exports and investment surged.

Gross domestic product rose 9.5 percent from a year earlier to 3.14 trillion yuan ($379 billion), matching the fourth- quarter's gain, the National Bureau of Statistics said in a statement released in Beijing. That exceeded the median 9 percent gain forecast in a Bloomberg News survey of 11 economists. Fixed- asset investment rose 23 percent."

The interesting piece is that the State-Owned Enterprises (SOE) participate in the rapid growth - "China's central State-owned enterprises (SOEs) realized a 31.2 per cent profit growth year-on-year in the first quarter, based on steady growth of output and more effective control of costs."

This is a lot, especially when someone thinks about the so-called "Law of Big Numbers", which says that it becomes increasingly harder to add another 10%, when the baseline is big already. This basically means that it is easier to grow 10% from a 100 than 10% from a 1,000 - to provide an easy example. Any comments?

(By Asia Business Consulting)