Economy to grow 11.6%, CPI seen at 4.5%

By Xin Zhiming (China Daily)
Updated: 2007-12-04 16:35

China's gross domestic product (GDP) growth is expected to be close to 11 percent next year but inflation will remain a major concern, said a top Chinese think tank.

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The economy will grow by 11.6 percent this year, marking the country's fifth consecutive year of double-digit GDP growth starting in 2003, according to the annual "blue book" on economic forecasts by the Chinese Academy of Social Sciences (CASS), which was released yesterday.

China's consumer price index (CPI), the main gauge of inflation, rose strongly in recent months, reaching a decade high of 6.5 percent in both October and August.

The CASS forecast it may be 4.5 percent this year and four percent next year.

"The first priority for China's macro controls in 2008 should be to contain overly fast rises in consumer and asset prices, to ease inflationary pressure and stabilize price levels," the book said.

China's trade surplus is expected to expand to $290 billion next year from $260 billion this year, but export growth will slow down to 20.5 percent from 25.1 percent thanks to the rising value of yuan and the government's efforts to rebalance trade, such as cutting export rebates.

The CASS predicted import growth will increase to 22.9 percent from 20.3 percent.

China's fixed-asset investment will expand by 25.6 percent year-on-year this year, the book said. Next year it could fall slightly to 24.2 percent.

The macroeconomic growth figures show the economy may become overheated if the trend continues, said Chen Jiagui, deputy head of CASS.

The combination of the rising prices of grain and food, ample liquidity and the real negative interest rate has pushed up asset prices, Chen said. "It is becoming harder to apply macroeconomic regulations."

He said it is best for China to keep the economic growth at about 9 percent next year, but according to the book, economists forecast it will be around 11 percent next year.

The think tank suggested the government should slow down economic growth next year through tightening measures. Apart from tightening controls on credit, the government can promote saving energy and cutting pollutant emissions to make economic growth more efficient. The government should also spend less on infrastructure and more on social security, build more affordable apartments and increase agricultural subsidies, the book said.

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