Xie Fuzhan (C), director of the National Bureau of Statistics, briefs the media on China's economy in 2007, in Beijing, Jan. 24, 2007. Photo: Xinhua/Zhang Yong

China's gross domestic product (GDP) grew 11.4% year-on-year to 24.6619 trillion yuan ($3.43 trillion) in 2007, but at the announcement today in Beijing, there was a warning that the risks of spiraling inflation and economic overheating were also rising.

The growth rate was 0.3%  points higher than the 2006 level revised at 11.1%, the National Bureau of Statistics (NBS) said on Thursday.

Inflation retreated to a 6.5% annual rate in December, still double the People's Bank of China target, from an 11-year high of 6.9% in November. China will be a key engine of growth in the world economy this year. Exports rose at the slowest pace since 2002 in the fourth quarter, reflecting weaker demand in the US and Japan.

China accounted for 17% of global growth, the same as the US, the United Nations estimates, and is poised to overtake Germany as the world's third-biggest economy this year.

Xinhua, China's State news agency says that NBS head Xie Fuzhan told reporters that 2007 was the fifth year in a row in which GDP had expanded by more than 10 percent. Analysts said the 2007 figure was also the highest of the past 13 years.

Breaking economic growth down by quarter, GDP expanded 11.1% in the first quarter, 11.9% in the second, 11.5% in the third and 11.2% in the fourth.

Xie said that the United States and China had been powerful engines during the current cycle of global growth. However, the mounting possibility of the US economy moving into a recession was bound to have a negative effect on the world economy.

However, Xie was confident of China's economic prospects, saying a "steady" growth was likely this year.

Xie said, "We will keep a close watch on developments in the U.S. economy on one hand. On the other hand, we'll be striving to address institutional and structural problems in the Chinese economy."

He said there was still a risk that China's economy could shift from rapid growth to overheating this year, with growing inflationary pressure. To avert this, the central government had adopted a tight monetary policy in tandem with a prudent fiscal policy for 2008.

The NBS said that factory and property investment in urban areas climbed 25.8% in 2007 from a year earlier, up from the 24.5% rate in 2006. Industrial output rose 17.4% in December, up from 17.3% in November.