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China's economy set for long-term growth despite hurdles

(Xinhua)

14:12, August 05, 2011

A slew of data seems to reinforce evidence that China's economy is slowing gently, prompting some observers to predict a "turning point" in the world's second largest economy which has enjoyed nearly double-digit growth over the past three decades.

Growth in China's manufacturing activity slowed for the fourth straight month in July, as the purchasing managers' index (PMI), which previews business conditions in factories, dipped to a 29-month low at 50.7, the China Federation of Logistics and Purchasing (CFLP) said Monday.

Growth in China's gross domestic product (GDP) slowed to 9.5 percent in the three months ending in June, slightly down from the previous quarter's 9.7 percent, and the 2010 fourth quarter's 9.8 percent, the National Bureau of Statistics (NBS) said last month.

However, analysts said the GDP growth was still strong enough to ease fears of a hard landing, and the slight easing was an intended result of the country's economic restructuring which aims to shift the economy to a more balanced growth pattern from the current investment-led one.

Bolstered by continued urbanization which boost domestic consumption, China's economic boom will continue, economists told Xinhua, while calling for substantial steps to reduce the economy's excessive dependence on investment.

GROWTH PATTERN PROBLEMS

Investment contributed to 53.2 percent of the country's GDP growth in the first half of this year, according to the NBS. A number of local officials have told Xinhua, on condition of anonymity, that investment was behind at least 70 percent of local GDP growth in western regions.

The potential financial risks of this growth pattern are huge.

China's first audit of local government debt found liabilities of about 10.7 trillion yuan (1.7 trillion U.S. dollars) at the end of last year, sounding the alarm of repayment risks, as this is equal to one fourth of the country's GDP and higher than its fiscal revenue in 2010.


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