China ended the third quarter of last year with a roaring growth rate of 9.1 per cent, and economists believe the nation could see 8.6 per cent overall growth for the year as a whole - despite the problems created by Sars in the first half.

Most top mainland and overseas economists project the economy to continue with 8 per cent-plus growth this year. The Chinese Macroeconomic Society of the State Council projects growth of 8.5 per cent. Citigroup sees the same. Deutsche Bank expects 8.4 per cent, while Morgan Stanley takes a more conservative view with a 7.8 per cent estimate.

Except for a mishap in the Taiwan Strait this year, it is unlikely foreign political events will have a dramatic impact on the mainland economy. Premier Wen Jiabao's visit to the US last month seems to have dampened the anti-China trade rhetoric from Washington. Premier Wen smoothed over ties with trade hawks in the US by promising to buy more US-made goods in the year ahead.

The biggest challenge for the mainland economy is in the unknown. Just as Sars came out of nowhere to wipe out economic activity in the first half of last year, unforeseen possibilities await this year. Economist Andy Xie, of Morgan Stanley in Hong Kong, is among those preaching caution.

'Global financial markets, especially in Asia, are just euphoric, in my view,' Mr Xie wrote in a recent report. 'We are probably witnessing another equity mania.

'Foreign funds have flowed rapidly into Asia, especially from the US. Initial public offerings are experiencing dotcom-like surges on their first day of trading. Investors are buying because they expect others to do the same. The 'greater fools' game is at play again.'

Another potential problem is the performance of the US economy, a major destination for mainland exports. With the fiscal deficit skyrocketing and national debt at nearly US$7 trillion, the US Federal Reserve is likely to raise interest rates to curtail spending.

Such a move could cause mainland exports to slow, posing a problem for Chinese manufacturers who have invested in new assembly lines. Some analysts fear the potential of a huge oversupply.

China is already under pressure from overinvestment, primarily from speculative loans made to the property sector, and the government has been cracking down in recent months.

'The gross misallocation of capital in the current credit bubble could haunt China's policymaking at least for the next two years,' said Mr Xie.

Huang Yiping, China economist with Citigroup, said he was not worried about a potential slowdown due to belt-tightening among US consumers, as China's domestic consumption could pick up the slack.

He said: 'Fundamental economic changes, such as urbanisation, demographic transition, increasing consumer financing and a growing middle class, favour stronger consumption.

'Consumption growth is likely to occur in three areas: return of basic consumer goods markets, a continued boom in information technology, housing and auto markets, and emerging hotspots of tourism, educational, medical and financial services.''

Hu Biliang, a senior economist with the Chinese Academy of Social Sciences, said this year ushered China into an era of sustainable economic growth that could last for decades. 'China has entered an era of massive industrialisation and urbanisation similar to what occurred in the US in late 1800s and early 1900s,' he said.

'You can't just look at China from a short period. You have to look at historical trends.

'First, there will be heavy investment in industrialisation, then urbanisation, then upgrading of rural areas and globalisation.'

Despite his optimism, Mr Hu warns the government must move faster in investing in social welfare.