Economist sees peak of overheating and slower money flow
The mainland's economic growth was 'extremely high' in the first five months of the year but should slow in the third quarter because of inflationary pressure in the US and Japan, says an investment bank economist.
'I think for China, the overheating is already peaking,' said Andy Xie, chief economist for Asia-Pacific at Morgan Stanley. 'Money won't be going into China anymore. The economy is going to be quite cool in the next year.'
Rising interest rates in the United States and Japan would cause yuan speculators to move their cash from the mainland to other markets to earn higher returns, Mr Xie said. A slowing US economy would also reduce the trade deficit with China and money flowing into the mainland.
Both of these factors would contribute to lower growth in the mainland economy, he added.
Mr Xie's comments came after People's Bank of China governor Zhou Xiaochuan said on Saturday that gross domestic product would grow at least 10 per cent in the second quarter and for all of 2006, according to a report by Reuters yesterday.
Speaking on the sidelines of the annual meeting of central bankers at the Bank for International Settlements in Basel, Switzerland, Mr Zhou said: 'I think probably for the entire year it's also something around 10 per cent' adding that second-quarter growth would also be 'probably quite high', at above 10 per cent.