China's Economy Grew By More Than 10 Percent In '06: "Structure Is Irrational"

Preliminary view puts growth at 10.5 percent last year.

BEIJING (AP) - Preliminary estimates show China's economy grew 10.5 percent last year and the country faces challenges in managing its rapid expansion, the government's top planning agency said Friday.

The National Development and Reform Commission's growth estimate was in line with forecasts by outside experts and China's central bank.

''According to preliminary estimates, the gross domestic product surpassed 20 trillion yuan ($2.6 trillion) and expanded by 10.5 percent'' in 2006, the Cabinet agency said on its Web site. It cited a report by its chairman, Ma Kai, at a government meeting.

Economic growth has slowed slightly amid government efforts to rein in a boom in real estate development and bank lending that leaders worry could ignite inflation or a debt crisis.

Growth hit 11.3 percent in the second quarter of 2006 - its highest rate in a decade - but fell to 10.4 percent in the third quarter.
The NDRC report gave no forecast for growth in 2007. A central bank researcher said last month the economy should expand by 10 percent next year.

Ma cautioned that China faces challenges in managing such rapid growth despite the government controls.

The economy faces ''contradictions and problems,'' Ma was quoted as saying. ''The economic structure is irrational and growth is crude.''

Beijing is trying to reduce China's dependence on exports and investment to drive growth. Authorities have tried, so far with only limited success, to increase domestic consumption.

The government is trying to curb investment in real estate development and industries such as auto manufacturing and textiles where the supply of factories and other assets exceeds demand. It worries that too much spending on investment could push up prices and leave borrowers and banks with dangerously high debt.

Beijing raised interest rates twice last year, has tightened bank credit four times and has imposed curbs on real estate development and autos, steel and other industries.