Page last updated at 11:00 GMT, Thursday, 22 October 2009 12:00 UK

China economic growth accelerates

Workers in a motorbike factory
Investment in factories has risen

China has said it is on track to hit its growth target of 8% this year, after the economy grew 8.9% from a year ago in the third quarter.

The figure is up from the 7.9% rate seen in the previous quarter and is the country's fastest GDP growth since the third quarter of last year.

Separate reports show that industrial production and retail sales also accelerated in September.

The economy grew by 7.7% in the nine months to September.

Retail sales growth was 15.1% in the first three quarters of the year, the National Statistics Bureau said.

China's car market has become the world's largest, with sales up 34% to 9.66 million vehicles in the first nine months of the year.

Government investment

At the end of 2008 the Chinese government announced a 4 trillion yuan ($586bn; £354bn) stimulus plan involving increased spending on infrastructure, such as rail and roads, to boost the domestic economy as exports slumped.

Latest figures show that investment, accounting for nearly 88% of GDP growth earlier this year, is playing a vital role in China's growth.

Investment in factories, construction and other fixed assets rose by one-third in the first nine months of the year to a record 15.5tn yuan.

But factory owners say that in many cases, while the volume of goods they are producing has risen, the prices customers are prepared to pay for them are lower than before the financial crisis.

Unemployment is still high in many areas, and some factory workers are reported to be working shorter hours and earning less.

The next challenge for policy makers is to begin to withdraw elements of the stimulus plan, and to reduce the huge outflows of credit the country's state owned banks have issued, without damaging economic recovery.

As the stimulus is withdrawn, the hope is that demand from the private sector, from consumer spending and eventually from renewed demand for China's exports, will keep the country's growth rate stable.

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