University report warns of 'sub-recession' in China

10:54, August 03, 2010      

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China's economy may face a "sub-recession" in the coming few months, according to a report by the School of Economics with Renmin University of China, which warned that lack of a driving force for long-term development is a more severe problem than the slowdown of economic growth.

China's GDP growth will maintain a downward trend in the rest of 2010, although China won't face a double-dip recession, according to the report.

The impact of weak export growth, falling fixed-asset investments and the tail-raising factors will come out in the fourth quarter, leading to a "sub-recession" in China, with "quarterly GDP growth lower than 9 percent, monthly CPI growth lower than 2 percent and the deterioration of gross dynamic balance."

Yang Ruilong, dean of Renmin University's School of Economics, said "sub-recession" means an economic slump after a rebound, but the slump is not large enough to be considered a double-dip recession.

The report defined a "double-dip" as data like employment and consumption recording large declines for over four consecutive months, with GDP growth rate lower than 8 percent for two consecutive quarters.

Data from China's National Bureau of Statistics (NBS) showed that the country's economy expanded by 10.3 percent in the second quarter of 2010, more than 1 percentage point lower than the previous quarter.

The rapid growth of macro economic output and the rebound of price levels are not indications that China has entered a sustainable growth cycle, Yang said.

"The drop of some economic metrics starting from the second quarter is unexpected," said Ba Shusong, deputy director-general of the Institute of Financial Studies Development Research Center of the State Council.

The growth rate of investments may also decline in future months, he added.

"The rebound and recovery of China's economy is based on factors such as the strong stimulus measures and relies on the stimulus policies and global recovery," said Liu Yuanchun, a professor of economics with Renmin University.

By People's Daily Online


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