GDP growth set to ease, says official think-tank
9.8pc rise forecast for second quarter, along with 1.5pc increase in the CPI
Gross domestic product on the mainland is set to grow by 9.8 per cent year on year in the second quarter, easing slightly from the 10.2 per cent pace set in the first three months of the year, according to a Beijing think-tank.
The State Information Centre also forecast the consumer price index would grow by about 1.5 per cent year on year this quarter and by 1.7 per cent in the third, accelerating from the 1.2 per cent recorded in the first quarter.
The CPI was expected to grow by 1.5 per cent for the full year, the think-tank said in a research report published yesterday in the official China Securities Journal.
Beijing has targeted economic growth of 8 per cent this year. Many economists expect a higher growth rate for the world's fastest growing major economy, based on faster-than-expected first-quarter growth in key indicators.
Vice-Minister of Finance Li Yong said at the weekend he expected full-year GDP growth to hit 9.5 per cent this year, compared with 9.9 per cent last year.
Peking University economist Song Guoqing said he expected year-on-year GDP growth would rise to 10.5 per cent in the second quarter, fuelled by robust fixed-asset investment growth.
The think-tank proposed a further tightening of money supply to curb capital investment - in particular for sectors deemed to be overheating, such as the booming property market, and facing problems such as overcapacity.
The report forecast fixed-asset investment would grow by 27 per cent year on year in the second quarter and 26.7 per cent in the third, easing slightly from the 27.7 per cent recorded in the first quarter. The central government had projected capital spending growth of 18 per cent for the whole year.
'We must raise the cost of capital, fine-tune domestic interest rate benchmarks and appropriately raise bank reserve requirements,' the research report urged.
On foreign trade, the report expected a trade surplus of US$29.1 billion for the second quarter and US$32.8 billion for the third, compared with US$23.3 billion recorded in the first quarter.
The strong first-quarter growth has prompted the central government to take moderate tightening steps, such as raising benchmark lending rates.
Qu Hongbin, chief China economist for HSBC in Hong Kong, said the economic cooling measures, introduced by the People's Bank of China last month, were less severe than those introduced in 2003 and 2004.
Mr Qu said the central bank would probably introduce more measures in the coming months. It could issue more bills to absorb liquidity in the market, raise the reserve requirement ratio for commercial banks to tighten credit, or raise interest rates to make borrowing more expensive.
