Nine pct growth expected to be new normal for Chinese economy: report

22:02, December 14, 2010      

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The Chinese economic growth is forecast to slow to 9.1 percent in 2011, from an estimate of 10.3 percent this year, and the 9 percent growth is expected to be a new normal for China in the post-crisis period, Bank of America Merrill Lynch said in a regional economic outlook report released on Tuesday.

After fluctuations since late 2008, China's gross domestic product (GDP) growth has stabilized at about 9 percent in both year on year and sequential terms, in comparison with the average 11-percent growth in years before the crisis, said the report.

The report, entitled "Asia-Pacific Macro Year Ahead 2011: Certain growth in an uncertain world", expected China's consumption should remain strong next year, supported by higher wage growth.

Investment will probably slow in 2011, but remain supported by government expenditure on housing and public projects. Fixed asset investment is also expected to fall on slower growth of private investment demand as a result of the government's property tightening measures and a lower loan growth, said the report.

A fall in export growth, owing to a higher comparative base and weak recovery in some major developed economies, would lead to the Chinese economic slowdown, it said.

Investment, consumption and export has for many years been driving forces of the Chinese economy.

From 2012 to 2015, the report forecast the Chinese economy is likely to expand by 9 percent, 8.5 percent, 8 percent and 8 percent, respectively. And for the subsequent five years of 2016- 2020, China's GDP growth might average at 7 percent.

Lu Ting, China economist with the Bank of America Merrill Lynch, attributed the "inevitable slowdown" to two major factors -- diminishing gain from institutional reforms and loss of demographic dividends.

"But two drivers also help buck the slowing trend: innovation as a result of rising Research &Development spending and within - country instead of outbound industrial relocation, thanks to the low capital base in China's poorer inland areas," Lu said.

Bank of America Merrill Lynch also said in the report China's consumer price index (CPI), a major gauge of inflation, is likely to rise to 4.5 percent in 2011, from 3.3 percent forecast for this year.
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