Goldman: China's GDP will rise 10% in 2011, no overheating

China's GDP growth will stand at 10.1 percent in 2010 and 10 percent in 2011, Goldman Sachs Group's China economist Qiao Hong predicted Monday.

"This level (of GDP growth) doesn't mean overheating," she said.

She said that China's domestic demand has become the main engine for the country's economic growth, and the contribution of exports to GDP is contracting.

Goldman Sachs' analysis showed that China's is less dependent on exports to developed regions, including the United States, the European Union, Japan and South Korea, while exports to other parts of the world have been expanding.

"Overseas demand will be weak in the next five years, making domestic consumption and investment the keys to sustainable economic growth," Qiao said.

The investment bank also warned of the possible danger of rising inflation. With the rebound of economic growth rate in the future, inflation may pick up again.

Goldman's analysis is that China's policy focus will shift to inflation control. Inflation expectations as well as future adjustment of prices and resource tax policies will dominate future monetary policies.

As to the issue of the yuan exchange rate, the investment bank predicted that yuan rate against the U.S. dollar will go up by 6 percent in the coming 12 months, and the real effective yuan rate will also rise slowly.

Letting the yuan rise further would help China transform from an export-led economy to one that encourages domestic consumption, said Jim O'Neill, head of Goldman Sachs asset management, on the same day.

By People's Daily Online