A LOOK at China's recent economic performance leaves no doubt that this country of 1.3 billion is on a roll.The Chinese economy, now the fourth largest in the world, has doubled its output, to US$2 trillion, in the five years since it joined the World Trade Organization, according to press reports.

The country's trade surplus increased to US$22.9 billion in November, up 32.8 percent from the year before.The visit to China of US Treasury Secretary Henry Paulson Jr, Federal Reserve Chairman Ben Bernanke and six Cabinet members in December, produced several statements on trade issues.

According to a report in the Wall Street Journal, "The major achievement of the meeting," said Paulson, was that it "has started a high-level dialogue on the economy between Washington and Beijing for the coming years."Coinciding with this event, predictions from economists within China suggested that their country's economy was on solid footing.

According to Zheng Chaoyu, director of the Institute of Economic Research at Renmin University of China in Beijing, in 2007, China would experience low inflation and a 9.25 percent growth rate, higher than the official prediction of 8 percent, but not as high as 10 percent "because the fixed-asset investment growth rate will continue to drop, and the export growth rate will be lower due to such factors as yuan appreciation."

Zheng also said that the government would continue its "moderate and stable finance and currency policy ... no drastic changes are expected."According to a report he contributed to, titled "China's Macro Economy and Policy: 2006 and 2007," the annual yuan appreciation rate will be at 6 percent between 2006 and 2010.

"Our estimation is probably too bold," he noted. "But since the beginning of exchange rate reform, the actual exchange rate change was 2 to 3 percent higher than many people's expectation."Zheng believed that the upward trend of FDI in China would be sustained this year. "We have a huge market and satisfactory labor, which is most attractive for foreign investors." Labor costs, he acknowledged, were "on the rise but will not have a inevitable impact in the short term."

Long term, he added, it was unclear whether productivity growth would counteract the impact of higher wages. His report assumed that wages would be growing at 10 percent annually.As for China's regulatory systems, Zheng pointed out that "foreigners always talk about how severe the regulations are for foreign businesses, but they are actually more severe for domestic businesses.

"Zheng predicted that in future, "policy makers will pay more and more attention to compliance." Many policies, he added, "cannot be implemented easily and they are not as tight as people assume."Zheng said he was impressed by "the ability of foreign companies to find ways to bypass policy barriers."Chinese enterprises would continue to expand abroad this year, he stated. The key growth areas "will be the resource sector and emerging markets.

But there will not be too many companies (going abroad) since the government is concerned about capital flight, corruption and the outflow of state-owned assets." At the same time, he added, the surge in offshore listings would not slow, "especially for state-owned enterprises, because of government support."Z

heng's prediction for an average 9 percent growth rate over the next 10 years was based on the country's rich labor resources, high savings rate and potential for technological improvement and institutional change."Workers in Guangdong Province work day and night with a monthly salary of less than US$150. Frankly speaking, I don't think there is any 'miracle' in China's economy," he said, reflecting the view that China's industriousness is responsible<