Economy

GDP 'to slow this year'

By Li Woke (China Daily)
Updated: 2011-01-24 07:14

Decreased rate due to measures to curb inflation, think tank says

BEIJING - The country's gross domestic product (GDP) growth is expected to retreat to 9.8 percent this year, with inflation likely to be under control at 3.7 percent, a government think tank said on Saturday.

"Tighter credit and a higher economic growth base in 2010 will drag down the 2011 GDP growth figure," a report released by the Center for Forecasting Science of the Chinese Academy of Sciences said.

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"Next year, domestic demand will replace investment as the main driver of the Chinese economy," it said.

China's 2010 GDP growth increased by 10.3 percent year-on-year, rapidly rebounding to double digits within three years of the global financial crisis' onset. It was 9.6 percent in 2008 and 9.2 percent in 2009, National Bureau of Statistics' (NBS) figures released on Thursday showed.

JPMorgan Chase predicted China's GDP growth will decrease to 9.6 percent in 2011, while the World Bank said the world's second-largest economy's growth is expected to ease to 8.4 percent in 2012 amid credit-tightening measures to combat inflation and surging property prices.

The Chinese Academy of Sciences' report also predicted the consumer price index (CPI), a main gauge of inflation, will decrease to 3.7 percent this year, while the producer price index (PPI), a measurement of inflation in wholesale prices, will be at 4.6 percent.

The rate of property price increases is also expected to slow. The average is predicted to be 5,711.51 yuan ($867) per square meter, a 12.77-percent increase over last year, the report said.

Drastic measures taken by the central government last year are showing results. Property prices in major cities are stable. And "the impacts of regulatory real estate market measures will be examined this year", Dong Jichang, a professor with the institute, said.

The think tank also said inflation is expected to reach its highest level in the first quarter of the year as a result of rising commodity and property prices.

In 2010, CPI reached 3.3 percent, exceeding the 3-percent target. It rose to 5.1 percent in November, the highest in more than two years, before dropping to 4.6 percent in December.

Since January 2010, the People's Bank of China, the country's central bank, has raised the benchmark interest rates twice and the reserve requirement ratio seven times amid concerns about excess liquidity.

Chinese banks lent 7.95 trillion yuan ($1.21 trillion) last year, central bank figures showed. Although it was 1.65 trillion yuan beneath the 2009 level of 9.6 trillion yuan, it still was greater than the government-determined full-year ceiling of 7.5 trillion yuan.

In addition, measures aimed at increasing food supplies, together with oversupply in the manufacturing sector and the appreciation of the yuan, will curb inflationary pressures later in the year, the think tank said.

Yale School of Management professor Chen Zhiwu predicted the central bank will increase benchmark interest rates again early next month and let the yuan appreciate about 3 percent this year to fight inflation.