The three-day Central Economic Work Conference that ended on December 5 cited overheating risks, inflation pressure, a weak agricultural sector, arduous energy conservation and emission reduction tasks, and prominent issues on welfare of the general public as major problems in the national economy for the coming year.

The conference concluded that the primary task of macroeconomic control is to prevent the economy from overheating and the current price rises led by foodstuff from evolving into "evident inflation."

The meeting decided to shift the country's monetary policy from "prudent," an approach China has followed for the last 10 years, to "tight." But the change of policy must be made to secure steady economic expansion. (More on this in Market Watch on page 40)

Economic Forecast

China's gross domestic product (GDP) growth is expected to hit 11.6 percent this year, the fifth consecutive year the country will have achieved double-digit GDP growth since 2003, according to the annual "blue book" on economic forecasts by the Chinese Academy of Social Sciences (CASS).

The CASS forecast consumer price index (CPI), the main gauge of inflation, may be 4.5 percent this year and 4 percent next year. China's CPI rose strongly in recent months, reaching a decade high of 6.5 percent in both August and October.

The book predicts that China's trade surplus is expected to expand to $290 billion next year from $260 billion this year, but export growth will slow down to 20.5 percent from 25.1 percent, thanks to the rising value of the yuan and the government's efforts to rebalance trade, such as cutting export rebates.

Banking Sector Spruced Up

As the sector continues to mature, Chinese banks have significantly improved their corporate governance and risk management, according to a new report released by the Research Center of Corporate Governance of Nankai University in Tianjin.

A total of 135 domestic banks now have more than an 8-percent capital adequacy ratio, while only eight banks reached the standard at the end of 2003, the report said.

Banks are required to have at least an 8-percent capital adequacy ratio before they can have a commercial operation and apply for mainland listings. Many banks now have a capital adequacy ratio surpassing 12 percent.

"Heated competition brought by foreign banks since the country opened its financial market, increasing mergers and acquisitions and expanding demand for service diversification and specialization have pushed Chinese banks to improve their corporate governance," said Liu Mingkang, Chairman of China Banking Regulatory Commission, the country's banking watchdog.

Mobile Phones Made In China

China is likely to produce nearly 500 million mobile phones in 2007, or more than 40 percent of the world's total, according to a Xinhua report.

The forecast figure is 41 percent higher than the 2006 output. Of the total production, around 400 million mobile phones will be exported, the report said.

However, competition from foreign brands remains formidable. Mobile phones made by Chinese producers saw their market share in China fall 2 percentage points from the end of 2006 to 33.8 percent in the first three quarters of 2007.

The 38 enterprises from the Chinese mainland sold 78.71 million GSM (global system of mobile communication) mobile phones in the nine months, only 62.3 percent of that of Finland-based Nokia on the mainland.