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Home >> Business
UPDATED: 16:57, October 11, 2006
China's GDP expected to grow 10.5 percent in 2006
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China's gross domestic product (GDP) is expected to rise by 10.5 percent in 2006, the Chinese Academy of Social Sciences (CASS), a major official think tank, said in a report.

The CASS report, made available to Xinhua Wednesday, also forecast that the country's economic growth rate would slow to 10.1 percent in 2007, thanks to the government's macro control policies.

The National Bureau of Statistics had earlier estimated the country's growth in the first half year at 10.9 percent, the highest in recent years.

The report predicted that China's trade surplus will hit a new high of 158 billion dollars in 2006. It will drop to 123 billion dollars in 2007.

Sustained growth in China's trade surplus has led to a rapid increase in the country's foreign reserves, which are widely expected to break the one trillion dollar mark in October.

This has in turn cranked up pressure for a revaluation of the Chinese currency yuan. China's biggest trade partner, the United States, has threatened to slam punitive duties on Chinese imports if the yuan is not revalued.

The CASS report said oversupply in some industries has forced producers to seek bigger overseas market shares.

It suggested that China further reform its foreign exchange rate determination mechanism and overhaul its export tariff rebate system to check the growth of its exports.

Runaway investment is another major headache for China's policy makers, forcing the government to keep tweaking macro control policies.

The macro control policies, including interest rate hikes and tightening of credit and land supply, have begun to have an effect.

The report said growth of fixed asset investment for the whole of 2006 will be around 24.8 percent, down from around 30 percent in the first six months. It would further fall to 20.4 percent in 2007.

"The macro economy is basically running well. The chances of crossing from 'a bit too fast' to 'overheating' are dwindling," the report said.

It warned that macro control policies must be retained in 2007 to prevent investments from bouncing back.

The report stressed the need to shore up people's incomes, so that economic growth is less dependent on investment and exports and more on consumption.

Commenting on the report, Fan Jianping, of the State Information Center, said the effect of the macro control policies should not be overestimated.

"Preventing the economy from overheating should remain the top policy priority for the next twelve months," he said.

Fan added that more needed to be done to solve the contradiction between the central government's desire for economic and social stability and that of local officials for higher growth rates.

The World Bank predicted in August that China's economy would grow 10.4 percent this year and 9.3 percent in 2007.

Source: Xinhua

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