China's Economy Likely to See a Slight Stagflation

A report from the Economic Forecast Department of National Information Center claimed that shining points have frequently emerged in China's economic development since January this year, which will provide a guarantee for the desirable operation of the economy in the coming several months. However, a slight stagflation may occur next year, this problem should have the high attention of related departments.

With regard to consumption, the rapid increase in this year's consumption demand can be attributed to many factors, such as the "holiday consumption" which is a completely new and very important factor. However, the new factor will become an old one next year. If other new points of growth do not appear, the consumption growth will fall back next year.

In regard to the investment, many of the factors that boosted the rapid growth of investment this year are completely new factors, e.g., the implementation of the strategy for western region development. In the next year, these factors will no longer play an obvious role in stimulating the growth of investment. It is quite possible for fixed assets investment to remain stable or decrease somewhat next year.

As regards the exports, the high oil price will lead to a reduction in the growth rate of the world economy, and to a relative drop in the international market demand for Chinese products. This, plus the high base number of this year, shows that there will be an obvious slow-down in the growth rate of China's export next year. However, in terms of imports, because China is in the period of economic restructuring and drastic readjustment of the product mix, its demand for the import of advanced foreign equipment, machinery, energy and raw and semi-finished materials, which are in short supply in China, will hardly be weakened in a short period of time. Such being the case, the growth of foreign trade surplus will obviously slow down next year, worst still, the possibility of a negative growth can hardly be ruled out.



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