Growth might reach 7.5pc in second quarter, official says

PUBLISHED : Wednesday, 08 July, 2009, 12:00am
UPDATED : Wednesday, 08 July, 2009, 12:00am

The mainland's economic growth might have accelerated to 7.5 per cent in the second quarter and was on track to meet Beijing's annual target, a top official said.

Zhang Jianhua, head of the People's Bank of China's research bureau, is the latest senior official to confirm the nation may have become the first major economy to recover from the global recession.

Last week, Premier Wen Jiabao said the economy was stabilising and improving, confirming central bank governor Zhou Xiaochuan's view that the economy might have expanded more strongly in the second quarter than in the first.

Beijing believes 8 per cent growth is the minimum target needed to create enough jobs to maintain social stability amid a slump in exports, which has forced 30 million workers out of factories in coastal provinces.

'Despite a global economic contraction and some uncertainties over growth in domestic demand, China's economic recovery will continue,' Mr Zhang said in an article in the central bank's China Finance magazine.

Mr Zhang said the economy might expand 8 per cent in the third quarter and 9 per cent in the fourth quarter of the year, driven by the government's massive capital spending and growth in money supply.

His upbeat comments come on the heels of several international investment banks revising up their growth forecasts following a worse than expected 6.1 per cent expansion in the first quarter, the weakest in a decade.

BNP Paribas yesterday said the mainland's economic growth this year would top the government's 8 per cent target.

'Gross domestic product will expand 8.2 per cent from a year earlier, up from a previous 7.7 per cent forecast,' the Paris-based investment bank said in a research note to clients. Growth in 2010, it said, would be 9.5 per cent, up from its previous estimate of 8.5 per cent, on surging capital investment, household demand and stabilising demand for exports.

Merrill Lynch, JP Morgan Chase, Nomura International, Goldman Sachs Group, Morgan Stanley and the World Bank have all raised forecasts for the mainland's economic growth in the past month. The forecasts range from 7 to 8 per cent.

The government's 4 trillion yuan (HK$4.54 trillion) stimulus package has triggered a rise in capital investment and money supply.

Mr Zhou said in Hong Kong last week that he believed the economy would reach the 8 per cent target this year, given the steady improvement in the second quarter. The mainland's economy expanded 13 per cent in 2007 and 9 per cent last year.

Mr Zhang said it was 'very likely' that the economy would grow 8 per cent this year and about the same in 2010, given that there has been a weaker pace in global growth than before the financial crisis.

Mr Zhang said policymakers did not need to make drastic adjustments to monetary policy, but added that some 'fine-tuning' was necessary to prevent asset bubbles, bad-loan risks and a return to high inflation.