Industrial output reached 11.2 percent, a faster growth rate than China has seen in three years. Retail volumes are also starting to grow again, although incomes are not, and there still remains a nagging threat of further deflation. Although Dai's comment appears to signal that China has ruled out an outright devaluation for the next five years, he did not address that possibility that the allowable bandwidth for pegging the renminbi against the dollar could grow marginally in that time, as it has done recently. Moreover, China is again contemplating full convertibility of its currency now that the Asian financial crisis is over and China's GDP is growing again. Any moves to liberalize trading in the capital account are likely to be at least two years off, however.
Government spending is still the main engine driving the economy.
A key component of this infrastructure development is China's growing expressway system, of which nearly 6,500 miles are now open to traffic. The core grid is slated for completion in 2010, after which it will be possible to drive uninterrupted on multilane, limited access expressways from Harbin to Hong Kong , and from Shanghai to Tibet . A former senior officer in the U.S. Foreign Service, he has over 25 years of experience dealing with China.