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Economic growth potential underestimated: economist

(Xinhua)
Updated: 2007-02-09 16:06

China's economy still enjoys a huge growing potential although its gross domestic product (GDP) has maintained a double-digit growth for four straight years and hit a new high of 10.7 percent last year.

Economist Fan Gang who doubles as a member of the Monetary Policy Panel of China's central bank said that the academic world had started to change their traditional views on China's neck-breaking growth.

Fast rising productivity rather than the widely viewed low costs is playing a bigger role in spurring the growth of the world's fourth largest economy, he noted.

"The Chinese economy had no way to maintain rapid economic growth and simultaneously keep the prices at a low level if the country's labor productivity remained still," Fan said at an economic forum on the Sina.com, an international Internet portal.

China's GDP grew 10.7 percent to 20.94 trillion yuan (US$2.7 trillion) in 2006, exceeding the projected target of eight percent. Meanwhile, the consumer price index rose by 1.5 percent, about 0.3 percentage points lower than 2005 as official figures revealed.

Fan said that China's productivity had surged more than six percent annually over the past 15 to 20 years, beating the average of three to four percent of developed countries.

The average growth of labor productivity in developing countries lingered around one to two percent, he noted.

Fan's opinion was shared by the New York-based Conference Board, an international business organization who identified China as the fastest growing country in terms of labor productivity in a recent report.

The growth rate of China's labor productivity stood at 9.5 percent last year, beating all other countries across the world, the report said.

India came the next with 6.9 percent while that of the European Union was 4.1 percent. Productivity of the United States climbed 1.4 percent, it said.

Many experts have predicted that China's economy would continue to grow rapidly but face growing inflation pressure this year.

China's Ministry of Commerce has projected a growth of 2.5 percent for the year's consumer price index.

Vice governor of the People's Bank of China Xiang Junbo said that the central bank would keep a close eye upon the inflation as the current macro-control faces multiple challenges, including rebounding investment and bank lending.

"A GDP growth of 9.5 percent would be proper for China. Once the growth rate exceeded 11 percent, inflation would jump heavily and lead to overheating," Fan said.