Expert sees likely 10% climb in China’s GDP
China’s economy may grow 10 percent next year as the “huge” potential of domestic consumption and investments counter the impact of a global slowdown, a State Council researcher said.
The “vast development potential” of the world’s most-populous nation will ensure a fast rate of expansion next year, said Zhang Liqun, a researcher with the Cabinet’s Development Research Center. “Domestic enterprises need to accelerate the pace in upgrading their business structures to better cope with a severe world economic situation.”
China last week cut its benchmark interest rate by the most in 11 years and has unveiled a 4-trillion-yuan (US$586 billion) stimulus plan to protect the economy from a global recession. Zhang’s optimism isn’t shared by the World Bank, which last Tuesday said China’s gross domestic product is expected to expand next year at the slowest pace in almost two decades. “We expect growth more likely to be at a rate of between 8 percent and 9 percent,” Fan Jianping, chief economist at China’s State Information Center, said by phone with Bloomberg News from Beijing yesterday. “The stimulus package could contribute 1 to 2 percentage points, but the overall trend will be a down arrow.”
Key rate cut
Consumer prices in China may increase by 3 percent next year, compared with 7 percent in the first nine months of this year, Zhang said in a Xinhua news agency report.
China’s central bank lowered its key lending rate by 108 basis points to ”ensure sufficient liquidity in the banking system and to promote steady loan growth so that monetary policy can play an active role in supporting economic growth,” the People’s Bank of China said last week. A basis point is 0.01 percentage point.
China can help cushion the global recession by stoking its own expansion, President Hu Jintao told the Group of 20 nation leaders in Washington last month.
The World Bank cut its forecast for China’s economic growth next year to 7.5 percent from 9.2 percent previously. The Organization for Economic Cooperation and Development also lowered its forecast.
China’s economy grew 9 percent, the weakest pace in five years, in the third quarter, slowing from 11.9 percent last year. The slowdown is deepening, after export orders fell last month to the lowest level since 2005 and property prices slid.
Extra measures
The Cabinet last Wednesday said it was studying extra measures to help struggling companies in the steel, auto, petrochemical and textile industries; to increase key commodity reserves; and to expand insurance for the jobless.
“The government probably has little choice if it is to follow through on its ambitious plan to revive the economy,” said Mark Williams, a London-based economist at Capital Economics.
Tags: central-bank, investment