world growth

world growth

Saturday, May 9, 2009

China seen growing 7 percent in Q2

Chinese annual economic growth will rise to 7 percent in the second quarter, according to a key Chinese government think-tank forecast in a report published on Monday, up from the first quarter's 6.1 percent.

The State Information Centre (SIC) also said in the report published in the official China Securities Journal that China would continue an appropriately loose monetary policy but that record loan growth was not sustainable.

Interest rates and reserve requirements should be adjusted reasonably, and open-market operations should be conducted flexibly, to maintain sufficient liquidity in the money market,' said the think tank under China's powerful economic planning agency.

It added that the central bank should implement a policy of preferential interest rates and easier credit for small companies and households.

China should make contingency plans as the global economy may weaken further, but the priority for the second quarter was to implement existing policies, the think tank said.

The SIC said strong fixed-asset investment would be the key driver of the expected modest recovery in the second quarter.

But exports, another engine of China's economic growth, were likely to fall 20.2 percent in the second quarter.

Other government economists agreed that the best thing to do was to stay the course on policy.

Zhang Yutai, head of the cabinet's Development Research Centre, said in an interview with the People's Daily that China was in no rush to launch new stimulus as the current economic performance was 'better than expected'.

'For now, the most important thing is to properly implement existing policies,' Zhang told the ruling Communist Party's mouthpiece.

But Zhang added it was still too early to say that China's economy had bottomed out, citing weak activity in the private sector, slow growth in residents' incomes, and continuing uncertainty in the global economy.

SIC Forecasts on Q2 economic indicators

Q2 (Expected) Q1 (Actual)

GDP 7.0 6.1

Industrial Output 7.1 5.1

Urban FAI 27.3 28.6

Retail Sales 14.0 15.0

Exports -20.2 -19.7

Imports -25.5 -30.9

Surplus ($ bln) 62.1 62.3

CPI -1.3 -0.6

PPI -7.5 -4.6

M2 21.0 25.5

(Reporting by Edmund Klamann in Shanghai and Zhou Xin in Beijing; Editing by Chris Lewis)

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