By Xin Zhiming (China Daily)
Updated: 2007-09-06 10:56

Customers shop at a supermarket in Beijing in September. China's GDP increased 11.5 percent in the first six months of the year, with investment, inflation and lending maintaining strong growth. [Bloomberg News]

China's economic growth may face uncertainties in the coming months. Whatever those uncertainties are, analysts agree the economy will continue its rapid growth.

China's gross domestic product (GDP) increased 11.5 percent in the first six months of the year, with investment, inflation and lending maintaining strong growth.

Economic growth in the second half of 2006 was lower than the first half, and therefore year-on-year growth in this year's second half should be stronger, says Liang Hong, chief economist of Goldman Sachs (Asia) in Hong Kong.

The country's GDP growth may reach 12.6 percent for the second half, while the whole-year figure could be 12.3 percent, Liang says.

The authorities' tightening measures have been slower and softer than those in 2004, when China experienced a major economic expansion, she says. "This has made the economy grow faster by far."

Economic growth will remain strong in the third quarter, Liang says, but she is not sure the momentum will continue in the fourth quarter, since the severity of expected tightening measures remains unknown.

Liang says besides an interest rate hike, administrative measures will become the major tools of policymakers.

Decisive monetary tightening may take place in the very near term, and it will involve mostly administrative measures such as a more aggressive liquidity withdrawal by the central bank (possibly through larger or more frequent reserve requirement ratio hikes), stepped-up moral suasion on commercial banks to curb lending, and other administrative measures to curb investment demand, Liang says.

Externally, China has a favorable environment for its economic growth. The global economy is performing well, despite interruptions from subprime problems arising in the US.

"Global growth continues to do well, and this is a partial explanation as to why China's growth is so high," Bert Hofman, the World Bank's lead economist in China, says.

The central banks of some major economies have intervened to head off a potential financial crisis triggered by the US subprime mortgage lending woes.

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