China’s economy grew by 7.9% in the second quarter, exceeding most analysts’ expectations, and lending credence to Beijing’s goal of 8% annual growth. Now, with the nation awash in liquidity and the economy picking up steam, the only task ahead of the central government is deciding when to rein in lending and let the economy stand on its own two feet.

The momentum behind China’s economy is staggering.

“China is increasingly becoming a responsible citizen in the global community,” economist Allen Sinai of Decision Economics told The Associated Press. “No longer lawless, no longer difficult to deal with, much more responsible. It is now a powerhouse among economies and finance. And it’s a rich country.”

In just the past few weeks, two of the world’s key global institutions – the World Bank and the Organization for Economic Cooperation and Development (OECD) – and a large swath of investment banks raised their 2009

I posted an update on China’s growth outlook a few days ago and said ” … China’s improving PMI seems to indicate that the country might have seen the worst of the growth statistics”. I also referred to a report by BCA Research, stating that “a broad range of macro indicators suggest that the economy may have begun to rebound”.

Interestingly, a “flash” report (hat tip: Fullermoney) by Helen Qiao and Yu Song of Goldman Sachs’s Asian team has just been published in which they have significantly raised their real GDP growth forecasts for China for 2009 and 2010.

Goldman’s new forecasts predict real GDP growth of 8.3% in 2009 (versus 6.0% previously) and, more importantly, that it will reach 10.9% in 2010 (up from 9.0%). These figures are significantly above consensus.

According to the team, the