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Inflation rise 'on the horizon'

By Chen Jia (China Daily)

08:06, January 21, 2013

GDP growth to remain the same but prices may go up: think tank

Growth levels will remain about the same in 2013 but inflation is likely to rebound moderately, according to economists at the government's leading think tank.

GDP growth will stay at 2012 levels, about 7.8 percent, and the Consumer Price Index, a main gauge of inflation, may go up from 2.6 percent in 2012 to 4 percent, said Yu Bin, the director of macroeconomic research at the State Council Development Research Center.

Fixed-asset investment, which is seen as the most powerful driver of the world's second-largest economy, may continue to face downward pressure, amid restrictions on raising property prices.

The National Bureau of Statistics reported on Friday that GDP growth was 7.8 percent in 2012, a 13-year low. It registered 9.3 percent in 2011.

"We should not be too optimistic about the economic situation in 2013, although growth rebounded in the final quarter last year to 7.9 percent from the 14-quarter low of 7.4 percent during July to September," Yu said.

The two biggest areas of fixed-asset investment, manufacturing and infrastructure, both registered declines.

Investment in manufacturing, which accounts for 35 percent of fixed-asset investment, slowed to 22 percent in 2012 from 31.8 percent in 2011, the NBS reported.

Infrastructure investment, 25 percent of fixed-asset investment, shrank to 15.6 percent by the end of December 2012 from 16.2 percent in the first 11 months. Meanwhile, growth in property investment edged lower to 16.2 percent during the past year, against 16.7 percent from January to November.

Consumption will finally replace investment and exports to become the main driving force of China's growth, although it will take "quite a long time", he said.

Rising costs will hit investment, Feng Fei, also a researcher from the center, said.

"Investment is no longer an efficient way to boost GDP in China as the cost is rising and the potential risks in the financial system are accumulating fast."

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