China's economic growth expected to slow down

Updated: 2006-10-19 09:27

Chinese experts have predicted that the growth of China's economy will slow down over the rest of the year.

The third quarter growth will fall about 1 percent from the second quarter to 10.3-10.5 percent and the growth in the fourth quarter figure will decline to 10 percent, economist Wang Xiaoguang told Xinhua on Wednesday.

Although official statistics for the third quarter are yet to be released, he said that China's economy was expected to grow 10.5-10.6 percent this year, comparing with the National Bureau of Statistics' earlier estimates that the country's growth for 2006 would be 10.9 percent, the highest in recent years.

However, since that estimate, the central government has adopted a series of measures including raising the deposit reserve ratio and new industrial policies to cool down the runaway investment and overheated real estate industry.

Official statistics show that year-on-year growth on fixed-asset investment in cities and townships dropped 5.9 percent from July to 21.5 percent in August. Output of industrial enterprises declined almost 4 percent from June to 15.7 percent in August.

The predicted decline in the growth rate has stoked fears that drastic macro-economic control would drive China's economy into depression.

Ha Jiming, chief economist of China International Capital Corporation Limited, argues that a drastic decline is impossible.

He said that the year's growth would stay at around 10.5 percent, which would be the highest in three years.

"The bottom line for China's economic growth is 8 percent. Fluctuations within the range of 8 to 11 percent are normal," said Wang Xiaoguang.

"The government should not falter from strengthening macro-economic control, given that the full impact of these measures will only be felt in one or two years," he said.

Experts have pointed out that local governments have emerged as the largest obstacles to the implementation of the central government's macro-economic control.

Wang said he believes the intervention of the central government in the economy is "feeble" compared to the control local governments exert.

Local governments often help companies to get round macro-control policies set by the central government. For instance, after the central government tightened the control of land use, some localities were found to be figuring out ways to give land developers what they want, Wang noted.

To remedy the situation, Wang said, many of the policies set by the central government are "actually aiming to rectify the behavior of local governments."

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