Different views on China's GDP growth in 2004

Looking into the year 2004, world-famous investment banks such as Goldman Sachs, Deutsche Bank AG are optimistic about the continued rapid development of China's economy, and raise their prediction on China's economic growth. However, Morgan Stanley hold that the nation's economy will forward at a lower pace in the coming year.

Goldman Sachs: 9.5 percent
Goldman Sachs, most optimistic about China's economy in 2004, raised its expectancy on China's GDP growth in 2004 to 9.5 percent in its report issued. This is the second time for Goldman Sachs to lift its expectation, and the figure is the highest among investment banks.

Liang Hong, economist with Goldman Sachs, said that Goldman Sachs believes that China is still in the initial stage of a new growth cycle. China's economy will maintain a speedy growth before the inflation and checking account pressure incurred by the unduly high domestic demand. In the year 2004, "the three wagons" hauling the economic growth: consumption, investment and export will continue fast running.

Goldman Sachs held that, there is no reason to worry that the central bank will adopt policies to slow down the economic development. Facts speak louder than words. With the two conflicting objectives¡ªeconomic development and inflation to be controlled ahead, supportive measures taken by the central bank for economic development will become more and more obvious.

Deutsche Bank AG: 8.4 percent
Deutsche Bank AG raised its 8-percent prediction on China¡¯s GDP growth next year to 8.4 percent. Ma Jun, economist with Deutsche Bank pointed out that the growth of investment of fixed assets will slow down from 23 percent this yea5r to 18 percent. Due to domestic supply shortage and reduced trade barriers, import will outgrow export. The soft keynote of China's macroeconomic policy in 2004 will be aimed to guarantee a strong economic growth momentum and a inflation rate about 2 percent.

Morgan Stanley: 7.8 percent
Morgan Stanley however, predicted a slowdown in China with a GDP growth rate of 7.8 percent in 2004 and 7.5 percent in 2005. Xie Guozhong, chief economist with Morgan Stanley Asia held that the Chinese government is striving for a soft landing as China can¡¯t see a sustained hike in 2003. The Chinese government will tighten up monetary policy and China's export will also decelerate as to reduce the fluidity of the banking system. The reduction of credit supply will effectively ease the growth momentum of investment in real estate and infrastructure construction and the reduced investment will greatly slow down China¡¯s growing import demand. The move will have an obvious impact on Asia¡¯s export economy in which China increasingly takes the lead. China will lower its need in equipment and raw materials from other Asian countries.

By PD Online with the article taken from International Finance News, December 24 and translated by staff member Gao Lanrong

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