China says its Gross domestic product (GDP) in 2009 expanded by 8.7% and the fourth quarter expanded 10.7% that form a powerful springboard for it to jump over Japan and become the world's second-largest economy.

The head of the National Bureau of Statistics Ma Jiantang announced the GDP report.

The report said its retail sales grew 17.5 percent in the year to December, accelerating from 15.8 percent in November and compared with forecasts of a 16.4 percent rise.

Industrial production growth slowed to 18.5 percent from 19.2 percent, undercutting market forecasts of a 20.0 percent increase.

Mr Ma said China had faced severe difficulties in 2009, but its economy has now recovered and is moving in the right direction.

Obviously the month-on-month growth momentum is very strong, said Xing Ziqiang, an economist at CICC in Beijing. So I think the chances for us to see an interest rate rise in the first quarter are increasing.

China has already taken a slew of steps to spur spending, including subsidies for rural buyers of domestic appliances and tax breaks on fuel-efficient cars, a measure that helped China to overtake the United States in 2009 as the world's largest car market.

Japan will announce its latest GDP figures next month. Experts said its economy is likely to have contracted by around 6% in 2009.