When Premier Wen Jiabao walks to the podium of the Great Hall of the People and delivers his annual government work report on March 5, he will most likely describe national development last year as 'truly extraordinary'. Admittedly he freely used the label in almost all his previous state of the union addresses. But looking at it from all perspectives, such a description for last year would be a fitting one.
After 'the most difficult year', in 2009, when the mainland started to pump four trillion yuan (HK$4.73 trillion) into the economy to deal with the onslaught of the global economic crisis, China became one of the first countries to stage a rebound last year.
But in the early part of the year, the mainland's leadership was caught in an acute dilemma: on the one hand, there were real concerns over international uncertainties, including the risks of a double-dip recession, and on the other hand, signs of overheating, particularly in the property sector, emerged as a result of ample liquidity.
By the time the leaders decided to shift their stance from a super-loose monetary policy to a prudent one, economic overheating had accelerated.
In the fourth quarter, gross domestic product surged 9.8 per cent year on year, up from 9.6 per cent in the third quarter. For the whole year, GDP rose 10.3 per cent, up from 9.2 per cent in 2009 and way over the government target of 8 per cent.
More ominously, inflation has begun to accelerate. The benchmark consumer price index rose to a high of 5.1 per cent in November. Although it softened to 4.6 per cent in December, economists generally expect it to rebound to 5.2 per cent or even higher when January inflation figures are released tomorrow. That partly explains why the People's Bank of China raised interest rates again last Tuesday, the third rise in four months. This followed a first surprise rise in October and the second on Christmas Day.
However, this is not over yet, as economists generally agree there should be more rises in interest rates and commercial banks' reserve ratios in the coming months.