Gross domestic product rose to 18.2 trillion yuan ($2.26 trillion) after expanding 10.1 percent in 2004, statistics bureau Commissioner Li Deshui said in Beijing. The U.K. economy was worth 1.13 trillion pounds ($2.02 trillion) in 2005, the Office for National Statistics in London said today.

Exports have helped China's economy more than double in size over the past decade, pushing commodities prices to records and increasing trade tensions with the U.S. and Europe. The government needs consumer spending to drive growth this year because excess manufacturing capacity threatens to cause bankruptcies and bad loans, Li said.

``The economy is still growing very strongly,'' said Ha Jiming, chief economist at CICC Corp, China's largest investment bank. He added that if ``domestic demand can't consume what China's producing, you'll get overcapacity, wasted investment, deflation and rising non-performing loans.''

China's economy grew 9.9 percent in the fourth quarter from a year earlier after expanding a revised 9.8 percent in the previous three months, the statistics bureau said today. Economists forecast growth of 9.5 percent in the quarter and 9.8 percent for the full year, according to a Bloomberg News survey.

The U.S. economy, which measured $11.7 trillion in 2004, is the world's largest, followed by Japan and Germany. India's central bank yesterday forecast expansion of as much as 8 percent in the fiscal year ending March 31 for the nation's $665 billion economy.

`A Threat'

Average growth of 10 percent is sustainable for ``many years,'' said Li, who is also a member of the central bank's policymaking board. Even so, he added, that ``overproduction is a threat because it will introduce bad loans among banks, cause bankruptcies and lead to rising unemployment.''

Steel capacity is already 120 million tons greater than demand and an additional 70 million tons is under construction, the National Development and Reform Commission said Dec. 3. More than a quarter of the nation's 10.3 million tons of aluminum production capacity is lying idle and vehicle production capacity is 2 million more than needed.

China's government in 2004 began to restrict new investment in industries it considered overheated, such as steel, cement, aluminum and real estate.

Commodities

China's banking regulator told banks on Jan. 18 to monitor their lending more closely, especially to industries where the government is restricting expansion, to prevent non-performing loans from amassing. China's banking system has created almost $850 billion in bad debt over the past 15 years, UBS AG said in a report the same day.

The Morgan Stanley Capital International Asia-Pacific Index added 0.7 percent to 125.96 at 2:15 p.m. in Tokyo after reports showed faster-than-expected economic growth in China and South Korea, whose economy grew 4 percent in 2005.

Materials companies including BHP Billiton were the biggest gainers as a group. Surging demand from China has driven up global commodities prices in the past year.

Copper for April delivery, the most active contract on the Shanghai Futures Exchange, rose 360 yuan, or 0.8 percent, to settle at 44,210 yuan a ton today, bringing gains in the past 12 months to 50 percent. Benchmark oil prices in New York have jumped 34 percent in that period and aluminum prices in Shanghai gained 26 percent.

China had the world's fastest-growing major economy and was the second-biggest contributor to global growth in 2004, after the U.S., according to the International Monetary Fund.

Bottlenecks

The nation's exports surged 28 percent to $762 billion last year, generating a record $102 billion trade surplus. Overseas sales amounted to almost 40 percent of GDP, compared with about 25 percent in France, according to the World Bank. Investment makes up almost half of China's output.

The forces that drove China's growth also led to difficulties. Its main trading partners accuse China of maintaining an undervalued currency to spur exports. The country is also suffering from transport bottlenecks and power shortages in several provinces.

``The composition of growth is becoming more important,'' said Andrew Milligan, head of global strategy at Standard Life Investments in Edinburgh, which oversees about $225 billion. ``The more it is orientated toward fixed-asset investment and exports, the more we are going to be seeing pressures for a revaluation and a potential trade disruption.''

Tariffs?

Lawmakers in the U.S., the biggest market for Chinese exports, say a 2.1 percent revaluation of the yuan against the dollar in July isn't enough and are considering tariffs on imports from China.

Expansion may slow to as little as 8.5 percent this year as growth in exports and investment cools, the statistics bureau said yesterday, citing a survey of 77 economists at the nation's top planning agencies. That would be the slowest pace since 2001.

A nationwide census completed last year that revealed millions of previously unaccounted-for services companies helped ease concerns about China's ability to sustain growth. The census, published last month, added $284 billion -- equivalent to the output of Austria -- to China's 2004 GDP and suggested services are more important to the economy than previously thought.

China's economy may still be as much as 20 percent larger that officially estimated, Zhu Min, an executive at Bank of China Ltd., the nation's second-largest lender, said in Davos, Switzerland, where he's attending the World Economic Forum.

Five-Year Plan

In announcing their blueprint for economic development for the coming five years in October, China's leaders said they will step up efforts to stimulate consumer spending in an economy where per capita incomes are still a 16th of France's.

Premier Wen Jiabao, 63, is also seeking to bolster living standards in the rural areas that are home to 800 million Chinese, and where incomes are a third of those in towns and cities. China abolished agriculture taxes from Jan. 1 and is lifting minimum wages.

Li said today that China's per capita income in 2005 was $1,700. That's up from $1,500 in 2004, when China ranked 129th in the world, behind Egypt and Iran, according to World Bank figures.

Companies such as Harley-Davidson Inc. are seeking to tap into that growth. A majority of business leaders plan to invest in China in the next three years, a PricewaterhouseCoopers LLP survey presented today in Davos showed.

Harley-Davidson, the biggest U.S. motorcycle maker, plans to open its first dealership in China as early as this year, it said last week.

Raising Incomes

Overall consumption, which includes government spending on services such as education and health as well as consumer purchases of houses and cars, accounted for about 55 percent of GDP in 2004, the lowest ratio since free-market reforms began in 1978, according to the Asian Development Bank.

Wen said the lack of public services is the ``weakest link'' in the development of rural areas, the official Xinhua News Agency reported on Jan. 19. He was cited as saying the government will spend more on health, education and infrastructure in the countryside over the next five years.

Raising rural incomes is a ``top priority'' for the government, the statistics bureau's Li said. Cutbacks in public services have prompted people to save rather than spend and China's gross savings rate was 47 percent of GDP in 2003, twice the world average, the World Bank estimates.

``The government has to spend more on education, healthcare and pensions to take the burden off individuals and give them more confidence to spend,'' said Qu Hongbin, an economist at HSBC Holdings Plc in Hong Kong.