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Last Updated:  Tuesday, 11 March, 2003, 10:59 GMT
China's factories enjoy rapid growth

Francis Markus
BBC Shanghai correspondent

General Motors production line in Shanghai
Factories are pumping out exports
China has announced record growth in industrial production, up 17.5% in January and February this year compared to the same two months of 2002.

Analysts say the figure is the highest since the mid-1990s.

But with fast-growing exports a vital ingredient in China's economic performance, a possible war in Iraq could cast a shadow over the country's growth prospects.

China's vast industrial machine is churning out mobile phones, television sets, computers and cars at a phenomenal rate.

Consumer boom

And whatever doubts there may be about the quality of China's economic data, the country's economic growth is the envy of just about everywhere else in the world, reaching 8% last year.

This year Beijing has predicted slower growth, possibly down to 7%.

The uncertain economic outlook as a possible war looms, is an important unknown.

The incomes of urban Chinese are increasing rapidly.

But the country's domestic market is still too small to absorb the roaring growth in industrial output.

War worries

If the country's main export markets such as the United States are plunged into gloom over the next few months, the Chinese economy could be slowed down.

On the bright side, that might help to ease some of the international pressure on Beijing to revalue its currency and stop cheap exports flooding other countries' markets.

But it could also make it harder to create the millions of jobs China needs to absorb laid off state sector workers and farmers seeking to escape rural poverty.

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