China's Economy in 2006/2007: Managing High Growth for Faster Structural Adjustment

China's economy in 2006 continued to register high growth of 10.5 to 10.7 percent with low inflation (CPI at 1.3 percent), dissipating fears of a hard landing. Since its accession to the WTO, China has become a significant global economic player, and is the favorite destination for many regional and global production networks. China is now a truly economic power (jingji daguo). China s economic leadership is also increasingly confident of its ability to manage China s domestic economic growth and its growing relations with the outside world. Although China s growth is expected to slow down in 2007 to approximately 9.5 percent, the national mood now is one of “more balanced” growth rather than “fast growth”. Therefore, the building of a “harmonious society” is to be emphasized in China, while letting economic growth solve the burning social and environmental issues. In 2007, the government will also need to deal with various internal and external macroeconomic imbalances. The renminbi will be under even stronger pressure to revalue, given China s record trade surplus of US$160bn and foreign reserves of US$1tn.