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SCMP Reporter

ECONOMISTS are divided over whether China's gross domestic product (GDP) growth will rebound in the last quarter, after a continued slowdown since the beginning of the year.

  The State Statistics Bureau yesterday said GDP growth in the first three quarters was 9.8 per cent, compared with the first-half rise of 10.3 per cent and 11.2 per cent in the first quarter.

  On a quarterly basis, it rose 9.6 per cent in the second quarter and 8.8 per cent in the third quarter.

  For those who expected a recovery, they said state bank moves to ease loan restrictions for working capital last month would stimulate growth.

  'The downward trend has hit bottom. From this month onward, economic growth will gradually pick up because of the credit easing for working capital,' Crosby Securities economist Chen Xingdong said.

  The decline in industrial output since July has raised fears of economic recession.

  Last month, the Industrial and Commercial Bank of China, the major source of funds for industrial and commercial enterprises, lifted the credit ceilings of China's 35 largest cities.

  The People's Construction Bank of China also relaxed loans to key projects, providing working capital to profitable enterprises.

  The relaxation, although not aimed at fixed asset investment, was timely for many enterprises struggling under squeezed liquidity.

  Mr Chen expected China would achieve a GDP growth slightly higher than the state target of eight to nine per cent. Last year, GDP grew at 11.8 per cent.

  'If the economy continues to slow down, it will affect sustainable economic growth in the long term,' he said. He pointed to idle production capacity, which would lead to unemployment, and a waste of unused investment capital.

   State Information Centre economist Li Guobing described the gradual economic slowdown as 'a success'.

  While China would retain rigid controls on fixed asset investment in non-productive sectors, he expected easier credit for productive ones by the end of the year.

  'The condition is that investment does not ignite inflation,' Mr Li said.

  However, Peregrine Brokerage economist Ma Guonan expected the economy would bottom out at eight per cent only in the first half of next year, before a rebound in the second half.

  'If the degree of tightness is not that severe, China can maintain the austerity programme for a quarter or so,' he said. He was not worried about stagflation because of diminishing underlying inflation.

  'Nine per cent economic growth is still healthy,' Mr Ma said and added the economy would grow at 8.5 per cent in the last quarter and 9.5 to 9.8 per cent for the whole year. 'Even if it rises at eight per cent, it is still acceptable.'    Chinese Academy of Social Sciences Institute Economics deputy director Fan Gang expected slower growth in the last quarter and a further slowdown next year.

  'It is most likely to be below 10 per cent. The slowdown is in line with the state plan,' Mr Fan, a member of vice-premier Zhu Rongji's think-tank, said.

   He said China had to sustain high economic growth and could not bear a standstill because: 'Economic growth is the solution to solve existing problems.'   Mr Fan expected the state to relax credit selectively in the first half of next year, favouring increased working capital for enterprises.



Growth rate divides economists