Chinese economy expected to grow 9% in Q3: Experts

08:10, October 19, 2009      

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China's economic recovery is gaining speed and the growth rate is expected to hit 9 percent in the third quarter, economists and analysts observed.


"China's economic stimulus plan has produced positive effects," said Zhao Jinping, a researcher with the Development Research Center of the State Council, or Cabinet.

He expected the country's gross domestic product (GDP) in the third quarter to rise 9 percent from a year earlier, up from 7.9 percent for the second quarter and 7.1 percent for the first half year.

"With the recovery of the world economy and trade environment, foreign trade, although still weak, will play a less negative role in the country's economy," Zhao said.

According to the General Administration of Customs, China's foreign trade continued to fall in September, but the rate of decline slowed. The total value of imports and exports for September was 218.94 billion U.S. dollars, down 10.1 percent from the same month last year, but up 14.2 percent from August.

"China's economic growth is very likely to exceed 9 percent. The strong rebound was based on the relatively low basis in the third quarter of last year," said Wang Tongsan, a senior researcher with Chinese Academy of Social Sciences, the government's top think-tank.

Zhuang Jian, a senior economist with the Asian Development Bank, gave a relatively prudent forecast, but his estimate was also between 8.5 and 9 percent. He expected an even faster economic growth rate in the fourth quarter.

"The accelerating growth was propped up by China's proactive fiscal policy and moderately loose monetary policy. China's economy is recovering at a speed not seen in other countries," Zhuang said.

Several institutions have also painted a rosy outlook for China's economic growth in the third quarter.

According to a recent report by the Bank of Communications, although China's consumer price index (CPI) and producer price index (PPI) will continue to go down in the third quarter, the decline will be narrowed and the country's GDP growth rate is expected to reach 9 percent.

Forecast from the U.S. investment bank Goldman Sachs is even bolder. The bank expected a close to 9.5 percent GDP growth for China in the third quarter.

It also predicted China's real economy would keep the momentum for recovery and the country was to see an end to deflation.

"Although it is still too early to draw the conclusion that China has steered itself out of the crisis, the momentum remains strong, and the four-trillion yuan (585 billion U.S. dollars) stimulus plan will continue to play a crucial role in stimulating consumption and enhancing infrastructure," Zhuang Jian said.


Thanks to the large-scale stimulus plan launched in the second half last year, Chinese economic recovery is well on track.

The Purchasing Managers' Index (PMI) of China's manufacturing sector rose to 54.3 percent in September, up 0.3 percentage points from a month earlier, indicating a good performance of the country's industrial sector.

According to China National Energy Administration, China's power consumption in September also continued to rise at a faster rate. Power consumption rose 10.24 percent from the same month last year to 322.41 billion kilowatt hours last month.

Fixed-asset investment increased in the first eight months by 33 percent from a year earlier, and the growth rate was 0.1 percentage point higher compared to the first seven months of this year.

Despite the achievement in economic recovery, Zhao Jinping said uncertainties remained in the world economy and some stimulus policies were yet to produce effects, so the stimulus plan should not be ended or weakened.

Besides, some economists said, as the stimulus plan was kept as an expedient measure rather than long-term policies, the government should step up efforts to restructure the economy to solve its deep-rooted deficiencies.

Among the three economic engines - consumption, investment and export, the latter two have always been dominant forces in propping up the economy. Declining demands in the weakening international market amid the financial crisis reveals the drawback of China's economic structure -- too much dependence on foreign markets.

Zhuang Jian said: "The current stimulus plan was led by investment, fixed investment in particular. This might cause problems if not dealt with properly. Given the foundation and momentum for the recovery was still not solid, if we continue the investment-oriented policies, the industrial structure may remain unbalanced and the investment wasted."

"Weak domestic consumption is the key problem that makes the foundation for recovery fragile. Expanding domestic consumption will be the focus in restructuring the economy," Zhao Jinping said.

Most economists see no threat from inflation despite the sharp increase of loans. New yuan-denominated loans in the first nine months stood at 8.67 trillion yuan, 5.19 trillion yuan more than the same period last year, according to the people's Bank of China, the central bank.

"However, there are still no sign of inflation as both CPI and PPI are still minus, but the government should improve the stimulus package and deal with the problems in the economic development properly," said Zhuang.

China's GDP is expected to grow about 8.3 percent year on year for 2009, and there will be no significant inflationary pressure this year or in 2010, according to a report released earlier this month by the Chinese Academy of Social Sciences.

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