The Chinese government announced recently that its economy grew nearly by 10 per cent last year. If this growth goes along the same lines, China’s economy will move ahead of Britain, France and Italy. It’ll become the world’s fourth largest economy. Many nations have yet to report their final economic data of 2005. In size, China's output has increased over the last decade. This is becasue of the fact that the country has moved towards capitalism and away from communism.

It has converted farmers into factory workers and has linked the fate of its people to the appetites of the shoppers in the United States, Japan and Europe.  In spite of the measures taken for cooling the hottest parts of the economy, China will still be growing at a rapid pace. Many factories have emerged thanks to aggressive investment and Chinese officials are getting anxious over the fact that unneeded plants could deliver a falling era of deflation, which means the lowering of prices. Profit making will also be effected by this, and it will reduce the incentives for companies to invest. Due to deflation there was unemployment for much of the last 16 years in Japan.

Li DeShui, a leading statistician of China, said that over capacity isn’t safe. He further said that it will lead to huge waste, and will generate bad loans for banks. He added that for some businessman, it would lead to losses.  Li said that China is not yet facing the problem, as the inflation is still at a healthy 1 per cent. He was sharing his views at a media briefing in Beijing.

It was noted by the National Development Commission that the steel capacity already outstrips the domestic demand. On top of it, new mills, which would add many million tons, are under construction. The demand for injecting modern life within China shouldn’t be underestimated. Many of the economists in China feel that China’s appetite for new housing would put the extra plants to work. The demand for the trappings of modern life shouldn't be underestimated.

Jonathan Anderson said that there isn’t any question that there is big demand.  Anderson added that local governments want to make science parks, and people want to make houses.  Anderson said that the expansion of manufacturing capacity is very slow.  He gave the instance of the steel industry of China that witnessed the capacity grow by around 40 per cent in 2004 and 2005. Anderson commented that the capacity would keep on growing, but only by 10 per cent.  Anderson quipped that people have to keep on spending, and overcapacity is going to disappear. He was speaking at an Investment Research Conference in Hong Kong.

Some people think that the data doesn’t absorb the reach of the economy. During last year, the government restated economic data when a nationwide census found out that millions of private service companies hadn't been calculated.