The Chinese Government recently announced that the country’s economy grew by +10.7% in Q4 2009 compared to the same period in 2008, up from the predicted rate of 9.1% in Q3.

Chinese gross domestic product (GDP) grew by +8.7%, surpassing the 8% growth-rate benchmark which Chinese leaders had asserted would be necessary to maintain social stability.

According to experts, if China continues with that rate of growth it will replace Japan as the world’s second-largest economy before the end of 2010.

In line with earlier predictions, the National Bureau of Statistics (NBS) announced that industrial production in December 2009 increased by +18.5% and retail sales rose by +17.5%, whilst the consumer price index increased by +1.9% and producer price index by +1.7%.

The central bank also recently raised its key interest rate, the first time it had done so in nearly five months. This is as Chinese officials remain concerned about inflation, excessive bank lending and loan defaults and plus regulators are also ordering state-owned banks to set aside a larger share of their deposits as reserves against failed loans. Investors and analysts did not expect this to happen until Q2 2010.