BOC says economy to slow on weak demand

09:09, December 30, 2010      

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China's GDP is predicted to grow by around 9.5 percent in 2011, 0.5 percentage points lower than the growth rate expected for this year, according to a report issued yesterday by the Bank of China (BOC).

The report by the BOC, China's third-largest lender, was based on the bank's projections of weak overseas demand, a 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 would switch its monetary policy stance from relatively loose to prudent next year to tackle rising inflation and keep economic growth at a sustainable pace.

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

It forecasts that inflation would rise 4 percent in 2011, compared with the 3.3 percent rise expected for 2010.

In the second half of the year, the producer price index for China's industrial products had kept rising along with the consumer price index, adding more inflationary pressure for the future, it added.

The Chinese government set a 3 percent target for inflation this year, but that looks unachievable 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 reach 7 trillion yuan ($1.06 trillion), 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 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 says the central bank will likely hike rates as many as three times next year, mostly during the first half of the year.

Source: Global Times
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