Economy

‘China’s GDP growth rate may fall to 9.6%’

PTI Beijing | Updated on July 29, 2011 Published on July 29, 2011

The Asian Development Bank has said that China’s GDP growth rate is likely to decrease to 9.6 per cent this year from last year’s 10.3 per cent as its economy will face downward risks in the coming months due to fast-rising domestic inflation and global uncertainties.

The Manila-based bank in its report forecast that China’s growth rate could slow even further to 9.2 per cent in 2012 as the country settles down to a single-digit growth after years of double-digit GDP.

According to China’s National Bureau of Statistics, the GDP expanded 9.5 per cent year-on-year, which is a decline compared to the 9.7 per cent rate achieved in the first quarter.

The consumer price index (CPI), a key gauge of inflation surged to 6.4 per cent year-on-year in June, which is a three-year record.

However, there won’t be a “hard landing” for the world’s second-largest economy, because “policymakers have learnt lessons from the 2008 financial crisis and they have the ability to avoid bad results”, Mr Iwan Azis, the head of the ADB’s Office of Regional Economic Integration, said.

The risk of the US sovereign rating being cut to AA from AAA is likely to increase the borrowing costs and accelerate the depreciation of the dollar, meaning losses for China and other countries that hold US Treasury securities in their foreign exchange reserves, Mr Azis was quoted by the China Daily as saying.

Other global economic uncertainties include an intensification of the debt crisis in some European countries, a slowdown of the US economic recovery and a slump in Japan following the March 11 earthquake and tsunami, he said.

These factors could cut the demand for products from China and some other export-led economies in Asia, the ADB said.

China is expected to continue tightening monetary policy and reducing the fiscal stimulus in the coming months, as inflation will remain a major economic risk, it said.

Mr Lu Zhengwei, chief economist with Industrial Bank Co Ltd, said that the August CPI figure might climb to 6.5 per cent and that might not be the year’s highest level, considering rapid rises in food and non-food prices.

“Although the economy shows signs of a slowdown, it is moderate, which means a hard-landing is unlikely. Another rise in interest rates is affordable for China and the central bank might lift rates in August,” Mr Lu said.

The ADB also predicted that aggregate GDP growth for emerging East Asian economies — including China, South Korea, Vietnam, Malaysia and Indonesia — might slide to 7.9 per cent this year from 9.3 per cent in 2010. The rate was forecast at 7.7 per cent in 2012.

The ADB suggested that emerging East Asia should accelerate regional policy cooperation and advance policy coordination to ensure more balanced and sustained growth.

Published on July 29, 2011
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