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| Economy Will Grow Less Than 10% Next Year |
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China's economic growth may fall under the 10 percent bar next year as investment, exports and industrial output slow down, a top think tank predicted on Wednesday. "With high growth and low inflation, the economy is ready for a soft landing, despite the problems of yawning surpluses, too-rapid investment and heavy pressure on environment and resources," said the Macro Economy Research Institute of the National Development and Reform Commission in its latest report. It said that the government's macro-economic policies have restrained runaway investment and loan supply. China's gross domestic product growth (GDP) will slip back to 10.3 percent in the fourth quarter from a second quarter peak of 11.3 percent. As a result, the year's GDP growth is expected to slow to 10.6 percent. The Consumer Price Index, an inflation weather vane, will grow 1.5 percent this year, it said. The report written by economist Wang Xiaoguang and three other experts claims that the world economy has entered an adjustment period. "Both trade and economic growth will slow next year. With flat demand and rising supply of raw materials, prices of oil and other primary raw materials will drop," it said. "Next year, China will have to deal with the toughest situation for exports that it has faced since it entered the World Trade Organization because the United States, which imports more than 40 percent of China-made exports each year, has seen a marked slowdown in its economic growth," said the report. The depreciating U.S. dollar and relatively high interest rates set by the American Federal Reserve would put more pressure on China to appreciate the Renminbi (RMB), it noted. The institute has urged China's Central Bank to adopt more stringent monetary policies, lifting interest rates for instance, to curb hot money inflow and cool RMB revaluation speculations. It also suggested a more flexible RMB exchange rate system. "Broadening the floating band would make investors and speculators more cautious and help stabilize the RMB." China currently only allows the RMB to rise or fall 0.3 percent on the inter-bank foreign exchange market from the central parity rate. The report said that governments, at both central and local level, should spend more on urban and rural public utilities and on social benefits, in particular health care, education and environmental protection. Monopolistic sectors should be taxed more or contribute a fraction of their profits to fuel the country's social security fund. The institute advocated further reduction of export tax rebates and the removal of incentives for foreign investment to make sure that the country's economy is less dependent on exports. China needs to adopt a more active employment policy to raise residents income and boost consumption, it said, adding that services and cars represent the biggest potential for consumption. (Xinhua News Agency October 26, 2006) |
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