Mainland growth tipped to exceed 9pc

PUBLISHED : Thursday, 29 September, 2011, 12:00am
UPDATED : Thursday, 29 September, 2011, 12:00am


The mainland's economic growth is likely to exceed 9 per cent this year, said a senior official, defying forecasts that Beijing's anti-inflationary policies would cause a hard landing.

Lu Zhongyuan, a deputy director of the State Council Development Research Centre, said the government should not adjust its macro policy at the moment, even as a recent slowdown in growth and moderating inflation had triggered increasingly louder calls for Beijing to loosen its monetary policy.

'China is currently going through a short-term moderation and growth is still within a normal range,' Lu said, adding that worries that the economy might see a hard landing were unfounded.

'Inflation is under control and within [the government's] expectations. And inflationary pressure is expected to ease next year,' he said at a briefing on the state of the economy yesterday. 'Under such circumstances, there is no need for the government to adjust its macro policy.'

Inflation is a major concern for policymakers, who fear price rises could fuel social unrest. The country's consumer price index, the main gauge of inflation, has been steadily rising and reached a three-year record of 6.5 per cent growth in July, before cooling to 6.2 per cent last month.

To curb rising prices, the People's Bank of China has raised the amount of funds commercial banks must keep in reserve six times this year. It has also raised interest rates five times since October last year.

Investors are watching whether Beijing can ease inflation without stifling growth. Growth has slowed, although moderately, since late last year. Gross domestic product grew 9.5 per cent year on year in the second quarter, tapering off slightly from 9.7 per cent in the first and 9.8 per cent in the fourth quarter of last year.

A string of disappointing readings on factory activity and exports have raised concerns that the economy may be slowing down more rapidly than expected.

A sharp slowdown in China would be damaging for global growth at a time when the US economy looks shaky and Europe is mired in a sovereign debt mess.

Lu said growth in the world's second-largest economy this year was expected to be the fastest in the world and this would help boost global economic recovery and help the world avoid a double-dip recession.

The mainland's growth would gradually slow in coming years but would still be above 8 per cent annually in the next five years, he said.

Lu dismissed fears that the nation was heading for a hard landing, saying the recent slowdown was within a 'normal scope'.

Slower growth rates would help contain rising prices and restructure the country's growth model, as well as reduce energy consumption and environment pollution.

Lu said a reasonable range of economic growth should be between 8 and 12 per cent in view of the performance of the nation's economy in the past three decades.

Although Lu sees this growth range as 'appropriate and reasonable', it is much higher than the government's targeted annual growth of 7 per cent in the 12th five-year plan to 2015.