By Zhao Huanxin (China Daily)
Updated: 2007-07-20 08:43

He said the country will strengthen macro controls, make efforts to adjust the economic structure, change the pattern of economic growth and deepen reform which will lead to the realization of sound and rapid growth.

The spokesman declined to say if the economic acceleration would increase the likelihood of the central bank raising interest rates again. He said it was up to the banking authorities to decide.

The People's Bank of China has raised the benchmark interest rate twice and has ordered lenders to set aside more reserves five times this year.

Li said economic growth, which used to rely on investment as well as exports, has seen some changes since the beginning of this year, when consumption, previously the weakest engine, is increasingly driving the boom.

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In the January-June period, retail sales hit a decade high to grow by 15.4 percent year on year, 2.1 percentage points more than in the same period last year.

In contrast, exports grew no faster than last year, and investment in fixed assets such as factories and properties dropped by 3.9 percentage points in the same period to reach 25.9 percent, according to the bureau statistics.

"The changes in domestic demand are what we were expecting," Li said, attributing higher consumption to income rises and increased spending on automobiles and housing.

He downplayed media reports that suggest the country may overtake Germany to become the world's third largest economy by the end of this year.

Estimates of aggregate GDP vary depending on the exchange rates used and how China's growth is forecast, Li said.

"But one thing is certain: We are drawing nearer to Germany and the gap is becoming smaller."

According to the World Bank, German economy was valued at $2.9 trillion at the end of 2006.

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