China economic fundamentals remain strong

09:33, July 27, 2010      

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China's economic fundamentals is expected to remain strong though a soft landing of its economy is underway, due to supply adjustments such as closing of energy- inefficient industrial enterprises and high base effects like rebound in growth that started in second half of 2009, a high-ranking official told Xinhua in an exclusive interview recently.

"Chinese economy's fundamentals remain strong, in my view," said Sundram Pushpanathan, deputy ASEAN secretary-general for ASEAN Economic Community.

For example, he said, to date, growth indicators such as exports and retail sales continue to be robust.

"Recent measures to accelerate social housing projects in the country are also positive for growth," he said.

From a longer perspective, he added, China will continue to be an important force in global economy.

"This robust and positive outlook is driven by China's strong macroeconomic fundamentals, as a result of strong commitment to market reforms, rapid capital accumulation, and significant productivity gains," he said.

According to Pushpanathan, China's macroeconomic indicators have been arguably the healthiest among those emerging market countries.

"China's strong economic performance has positively influenced not just the East Asian region but also the global economy as shown by its strong growth amidst the crisis and its increasingly important role as provider of FDI especially to other developing countries," Pushpanathan said.

Regarding inflation, he said, the underlying inflationary pressure in China has started to ease as recent figures suggest, although the overall inflation outlook will remain benign.

He said that according to Morgan Stanley, year-on-year CPI inflation in China is likely to peak in the third quarter (around 3.4 percent) before edging down below 3 percent by year-end.

"Nonetheless, inflation rate is not likely to decelerate sharply, in my view. This is because some factors are underway to prevent such decline, including the potential increase in food prices, utility price deregulation, and possible appreciation of renminbi," he said.

He added that in light of receding inflationary pressure and moderation in growth, monetary conditions will continue to be supportive of the on-going recovery.

"This implies that the current monetary policy stance will remain for now, with no possibility of a rate hike in the coming months," he said.

Pushpanathan said that as the biggest emerging economy right now, China is doing very well, providing a strong support to global recovery.

"Although China is expected to grow by around 9.6 percent this year, some risks remain, and which implies that domestic policy stance needs to be effectively managed," he said.

Source: Xinhua


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