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Home>>Business

Experts upbeat about Chinese economy in 2nd half, differ on macro
curbs

+ –
08:04, July 25, 2007

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After government decisions to slash deposit interest tax and increase
interest rates for third time this year, which were announced over the
weekend, some economists believe all necessary regulatory policies have
been put in place for the Chinese economy, and some others hold the macro
control should be further tightened.

Despite the disagreement, they are all optimistic about the development
trend of the economy in the second half of this year.

Some experts believed most major economic indicators for the first half
year, including GDP growth, retail sales and CPI, were higher than
expected. For instance, the key inflation indicator rose 4.4 percent
year-on-year in June, well above the government-set alarm level of three
percent.

Lin Zhaohui, a senior researcher with Guotai-J&A, a leading securities
firm, noted China’s economic growth pattern has since 2005 turned from
“high-growth with low inflation” to “higher growth with relatively high
inflation”.

The economic growth in the second half year will be driven mainly by
consumption, which usually peaks in the July-December period, and
investment, which tend to rally.

Given continuous export duty adjustments, accelerated appreciation of
Renminbi and faster growth in investment, foreign sales, which used to be
the third economic driving force besides the above two, are likely to
slow down its expansion, according to Lin.

Meanwhile, consumption and investment will conspire to push CPI further
up, of which such counters as grain and meat prices will remain high from
July to December, Lin forecast. This will exert pressure on macro
economic control in the six-month period, he believed.

However, some other economists argued there existed no overheating in the
national economy in the first half year and price hikes were due to
structural factor. After deducting foodstuffs, core of the index was not
high, they believed.

Xie Fuzhan, head of the National Bureau of Statistics, said the economic
growth in the January-June period remained on a largely healthy track.

An economist by profession, Xie said the gap between investment growth
and consumption growth narrowed more or less, as the investment growth
was 3.9 percentage points lower than the year-earlier level and
consumption growth was 2.1 percentage points higher.

Zhu Baoliang, deputy head of the economic projection department of the
State Information Center, said the rapid trade-surplus growth in the
first half of the year resulted from the fact that exporters had been
rushing against deadlines for export tax rebates to be cut or scrapped
altogether.He said the growth will slow down noticeably in the second
half.

In the wake of the cool-down in foreign trade, related investment will
experience a slowdown in growth rate too. Since no overheating will occur
in the second half year, further macro control measures will be
unnecessary, Zhu said.

Source: Xinhua

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