The Chinese economy grew in 2007 at its fastest pace in 13 years, expanding by 11.4 per cent and looking set to overtake Germany as the world’s third-largest, a feat that even usually dour officials described as extraordinary. It was China’s fifth year of double-digit growth.

But clouds are gathering amid indications that growth started to ease off very slightly towards the end of last year — just as fears are mounting of a recession in the United States — and with inflation holding at persistently high levels.

Glimpses of a slowing towards the end of 2007 are just what the Government, anxious about overheating, wants to see.

But it wants the deceleration only at a very measured pace and said it that was keeping a very close eye on the fallout from the sub-prime crisis in the United States, one of the main markets for China’s vast export industry.

The National Bureau of Statistics (NBS) said that annual gross domestic product growth had eased to 11.2 per cent in the fourth quarter, a touch below forecasts, from 11.5 per cent in the July to September period as global demand weakened and measures to curb inflation and bank lending took effect.

But global credit woes could cool growth to about 10 per cent this year.

Xie Fuzhan, the head of the NBS, said: “During the last five years our economy has seen stable yet rapid growth — it's the longest such period. Average growth over the last five years has been 10.6 per cent — that's really extraordinary.

"The ups and downs each year have also been limited — that's also extraordinary."

The red-hot growth has been fuelled by heavy capital spending on factories, property and public works, but yesterday’s figures showed that investment in fixed assets in urban areas had slowed to 19.6 per cent in December, from a year earlier, compared with a 26.8 per cent pace of growth in the first 11 months.

That trend should continue as Beijing has tightened monetary policy, ordered banks to lend less and issued a raft of administrative edicts to curb the expansion of low-end industries that pollute heavily and gobble energy.

Mr Xie cited concerns over imbalances, however.

The economy is skewed towards exports while domestic consumption has languished; household consumption contributes much less to overall growth than does investment; and a slowdown in the United States.

With export growth slowing from 29 per cent in the first half to about 22 per cent later in the year, officials are hoping that a rise in consumption at home will take up the slack.

Mr Xie said: “The Government could adopt a number of policies to offset the negative impact that could come from a slowing US economy. We need to closely watch the US economy and the policies the United States adopts to deal with it, to see what kind of influence it could have on the Chinese economy.

"On the other hand, we need to exercise good control over the Chinese economy to minimise the structural imbalances facing us."

Analysts are divided over the direction of Chinese monetary policy after a series of tightening measures in the past two years to tackle overheating and rising inflation.

Zhao Qingming, of China Construction Bank, said: “Now we are sure that external demand will weaken, creating a negative environment for investment.

"China may relax its tightening after March if domestic consumption is not as strong as expected and if investment drops sharply.”

Others said tht the surge in inflation, while slightly lower at 6.5 per cent in December from an 11-year high of 6.9 per cent in November, could spur yet more caution.

Alarmed by rising prices, which have touched off social unrest in the past, the authorities have imposed credit curbs, frozen energy and transport tariffs and returned to central planning-era measures such as the imposition of temporary price controls on food and some other everyday necessities.

Such is the level of anxiety among the Communist Party leadership that Wen Jiabao, the Prime Minister, has personally thrown his weight behind the new controls, the first such intervention since 1993, when inflation soared to more than 10 per cent.

Analysts said that it was too early for complacency, especially with the Government nervous to prevent a hard landing for eroding its legitimacy in the run-up to the Beijing Olympics in August.

Mr Xie, of the NBS, said: “Prices will face big pressures to rise this year. Even if there are no new price hikes, the effect of rises in 2007 will have a big impact on prices this year."

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