Economy

Economy to expand by 10% in 2011

By Li Xiang (China Daily)
Updated: 2010-12-08 09:06

CASS predicts double-digit increase, and a 'moderate' inflation rate

BEIJING - China's economy will expand by 10 percent in 2011, and inflation will remain moderate with the consumer price index (CPI) rising 3.3 percent, a top think tank predicted on Tuesday.

The Chinese Academy of Social Sciences (CASS) said in its annual Blue Book of China's Economy report that the economy will grow by 9.9 percent in 2010 and will retain relatively rapid growth, with the GDP growth rate reaching 10 percent in 2011.

The think tank also said that the intensity of the government's macroeconomic policies will remain stable, while the country's fixed-asset investment growth is likely to slow to 20 percent in 2011 from an estimated 23.5 percent pace this year.

However, some economists disputed the conclusions of the CASS report, predicting that the national economy may face a modest deceleration next year while inflation is likely to rise faster than expected.

"The growth rate of China's economy in 2011 will probably slow to 9.6 percent," said Liu Yuanchun, deputy director of Renmin University's School of Economics.

The World Bank in November said that China's economic growth may slow to 8.7 percent next year, and will see further easing in the medium term.

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Some analysts said that the Chinese economy may face headwinds next year due to the likely policy tightening measures to curb inflation and asset bubbles. But the risk of a significant growth downturn from the policy is limited.

"The impact of policy tightening on growth will likely start to emerge in March 2011 and become more pronounced in the second quarter of 2011," Goldman Sachs economists, Helen Qiao and Yu Song, said in a report.

They expected the government's tightening measures to expand in scale and intensify in implementation in the coming months to help cool growth. But they ruled out the downside risk of a policy overshoot triggering a hard landing with the annual GDP growth rate coming in below 6 percent.

Goldman Sachs has forecast that the nation's inflation rate will grow 4.3 percent next year, higher than the 3.3 percent predicted by CASS.

China shifted its monetary policy stance from a moderately loose one to a prudent one last week amid the central government's effort to contain inflation.

The country's consumer price index rose 4.4 percent year-on-year in October, well above the government's full-year target of 3 percent.

The People's Bank of China hiked the benchmark interest rate by 25 basis points in October for the first time in nearly three years. It also twice told banks to set aside more deposits as reserves to limit their capacity to lend.