China's economy, the world's fourth- largest, may expand as much as 10.7 percent in 2006, said Yao Jingyuan, chief economist at the National Bureau of Statistics.

Gross domestic product may rise between 10 percent and 10.7 percent this year, Yao told reporters at a steel conference in Shanghai today. Growth close to the top of the range would exceed the World Bank's Nov. 14 estimate for China's economy to advance 10.4 percent in 2006.

China has raised minimum wages and increased welfare spending to get households to spend more and make the world's fastest growing major economy less dependent on investment and exports. Economic expansion slowed in the third quarter for the first time in a year as lending curbs damped business spending.

"Given the pace of growth around the world, I don't think 10.7 percent is excessive," said Tai Hui, an economist at Standard Chartered Bank in Hong Kong. "China definitely needs some rebalancing" in growth away from business investment.

Standard Chartered forecasts China's economic growth will accelerate to between 10.6 percent and 10.8 percent this year. The economy advanced 10.2 percent in 2005.

The People's Bank of China, the nation's central bank, on Nov. 14 said the economy likely will expand at a more than 10 percent pace in 2006. The central bank raised interest rates twice this year to cool an investment boom that threatens to leave China with idle factories.

Growth in fixed-asset investment and industrial production has moderated since June, reflecting tighter rules on land use, higher rates and efforts by the central bank to remove funds from the financial system. By contrast, retail sales jumped in October at the fastest pace in almost two years as rising incomes spurred consumer spending.

Investment May Rebound

"China's macro-economic measures to rebalance growth are correct, but the question is whether the magnitude or aggressiveness are sufficient enough," Hui said.

Profits at industrial companies accelerated in October for a seventh straight month as steelmakers including Baoshan Iron & Steel Co. boosted prices, the statistics bureau reported Nov. 22. Rising profits may cause business investment to rebound as many companies finance capacity expansion from retained earnings.

China's inflation rate will be "as high as 1.5 percent for 2006," Yao also said at the conference today. Rising prices are a sign that deflation, which has plagued China for years, may be on the wane, he said.

The nation's trade surplus will be more than $150 billion this year, Yao said, without giving a comparison for 2005.

Money Supply

China's trade surplus surged to a record $23.8 billion in the month of October as imports grew at the slowest pace in 15 months, raising the likelihood that the U.S. and Europe will intensify demands for currency gains and more market access.

U.S. and European policy makers have accused China of keeping its currency undervalued, ignoring copyrights and protecting local businesses.

The government's fiscal revenues for the year will be 4 trillion yuan ($510 billion), Yao said, without providing a comparison for 2005.

China's money supply measure, M2, will gain between 16 percent and 17 percent in 2007, said Wang Yu, a director of China's central bank. Wang also was speaking at the conference in Shanghai.

M2, the broadest measure of money supply, gained 17.1 percent in October from a year earlier, a Nov. 13 report showed.

China's foreign exchange reserves exceeded $1 trillion by the end of October, Wang said. The nation's foreign exchange reserves are the world's largest.