Stick to the basics

Economists are finding it somewhat difficult to forecast the growth rate of the Chinese economy which slipped into single-digit growth in the third quarter for the first time in at least four years.

Will China's economic growth slow down to 7.5 percent next year, the lowest since 1990, as the World Bank recently predicted? Or will it manage to achieve a remarkable 10-percent growth in 2009 despite the impact of the global financial crisis and economic downturn, as an expert from the Development Research Center under the State Council foresaw?

Given the increasing evidence that the Chinese economy is slowing rapidly in the face of deepening global financial crisis and economic recession, it is hard to say the World Bank's forecast is too pessimistic.

Latest statistics show that the Purchasing Managers' Index fell rapidly in November to the lowest point with export orders, output and new orders all contracted sharply since the survey began in 2005. Such drastic shrinkage of manufacturing indicates that a tougher time is ahead for the Chinese economy.

However, in view of all the monetary and fiscal measures the Chinese government has so far taken to boost domestic demand, it may not be too wide off the mark to predict that there would be no big drop in the nation's economic growth in the near future.

Chinese policymakers have not only slashed interest rates four times since September but also launched a 4-trillion-yuan stimulus package to cushion the economy against a global slowdown.

With strengthened government efforts to boost economic growth on one side and more signs that the global financial crisis will take a greater toll on the Chinese economy on the other, it is not easy to tell the exact growth trend.

The only thing that is obvious now is that, after five years of double-digit growth, China will definitely see single-digit growth this year.

The latest forecast made by the Chinese Academy of Social Sciences (CASS) that the Chinese economy will grow 9.8 percent this year and about 9 percent next year reflect a moderately upbeat view about the country's growth outlook. The current consensus seems to only insist that the country needs to ensure economic growth faster than 8 percent next year to prevent massive unemployment.

By foreseeing an 11 percent growth of the Chinese economy for 2008 in last year's report, the CASS did not prove itself better than others in foretelling the about-turn of China's economic conditions from overheating in the first half of the year to the sharp slowdown at present.

But a sense of confidence that China's economic growth may accelerate later next year is well grounded because of the country's huge domestic consumption and investment potential as well as the government's decisive macro-economic control measures.

(China Daily 12/03/2008 page8)