China's GDP to grow about 9 pct next year as challenges remain: scholar

10:35, October 17, 2010      

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China's gross domestic product (GDP) will grow about 9 percent next year, but the economy will be challenged by rising labor costs, liquidity problems and difficulty in sustaining rapid growth in the long run, a senior researcher at the country's top think-tank said Saturday.

Liu Shijin, deputy director of the Development Research Center of the State Council, or China's Cabinet, spoke at the OTO Fortune Forum held by the Bank of Communications.

As for the year 2010, Liu predicted an annual 10-percent GDP growth due to the economic slowdown in China during the second half of the year.

He said China's exports and investments would be much better in 2011 than this year, but the growth rate of consumption would pull back slightly from this year's boom, making 9 percent growth "very likely".

To keep its economy on track for sustained growth, however, China still faces three major challenges in the long term, according to Liu's research.

"The first challenge comes from the rapid rise of labor costs in the country," Liu said, warning: "The competitiveness of Chinese companies will be threatened by rising labor costs unless they find a new source of growth, such as innovation."

The second challenge is from liquidity as China's currency, the renminbi, and other non-U.S. dollar currencies are under forced appreciation pressure following the Federal Reserve's considering a new round of quantitative easing of the monetary policy, he said.

The greenback, which serves as the world's reserve currency, tumbled against most major currencies this week on expected easing move by the Federal Reserve to pump more money into the U.S. economy next month.

Meanwhile, China's economic stimulus package also injected excessive liquidity into the market, pushing up prices of commodities, equities and other land-related assets or resources, he added.

The third major challenge concerns whether China can maintain its quick economic expansion in the future, he said.

According to Liu's forecast, in the next three to five years China's GDP growth will slow to a moderate speed of around 7 percent from its current 10 percent.

"Actually, we don't have to be too worried about an economy with moderate expansion," he said, "because the current economic growth is too high for China."

Source: Xinhua


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