China's economy to slow down in 2011: Bank

20:50, December 29, 2010      

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China's gross domestic product (GDP) is predicted to grow by around 9.5 percent in 2011, 0.5 percentage points lower compared to the growth rate expected for this year, said a report issued Wednesday by the Bank of China (BOC).

The Chinese Academy of Social Sciences, a top think tank, said in its annual Blue Book of China's Economy report in early December set the the GDP growth rate reaching 10 percent in 2011.

The report by the BOC, China's third largest lender, was based on the bank's projections of weak overseas demand, tighter monetary policy, and the government's planned economic restructuring for 2011, the first year of China's 12th five-year plan.

The Chinese government announced in early December that it will switch its monetary policy stance from relatively loose to prudent next year to tackle rising inflation and keep economic growth at a sustainable pace.

The report also said government policies this year to curb soaring property prices in some major cities, and the country's efforts to improve energy efficiency had slowed the economy with the GDP dropping to 9.6 percent in the third quarter, down from the second quarter's 10.3 percent and 11.9 percent in the first quarter.

The report also forecast inflation to rise 4 percent in 2011, compared to the 3.3-percent rise expected for 2010. It said that in the second half of the year, the producer price index (PPI) for China's industrial products had kept rising along with the consumer price index (CPI), adding more inflationary pressure for the future.

The Chinese government set a 3-percent target for inflation this year, but looks unachieveable after the index rose 3.2 percent during the first 11 months. Pushed up mainly by rising food prices, the index soared 5.1 percent in November to a 28-month high.

The report also predicted new lending next year would be 7 trillion yuan (1.06 trillion U.S. dollars), just slightly down from the 7.5 trillion yuan target set by the government for 2010.

Growth rates of retail sales of consumer goods and industrial value-added output would see a slight drop from year 2010, while imports would likely grow by 18 percent, 3 percentage points higher than exports.

As inflation triggers wider public concerns, expectations for more hikes in interest rates are strengthening. The report forecast the People's Bank of China, the central bank, would likely hike rates for up to three times next year, mostly during the first half of the year.

The central bank on Sunday raised the benchmark one-year lending and deposit rates by 25 basis points for the second time in just over two months. It had also set higher commercial lenders' reserve requirement ratio six times this year in a move to tighten liquidity amid climbing inflation.

Source: Xinhua
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