Economy to grow 9.4% this year and 8.9% next
China's economy is expected to grow 9.4 per cent this year and slow slightly to 8.9 per cent next year, reported the Chinese Academy of Social Sciences at a symposium on China's economic situation in Beijing yesterday.
Wang Tongsan, a senior economist with the academy, said the country's economic growth this year should be higher than last year's 9.1 per cent, as the economy has stepped into an upward development period.
"If there are no major breaking events internationally, or severe natural disasters or other big domestic issues, the country's economy is capable of maintaining a growth rate of more than 8 per cent next year, due to the country's macro-control measures," he said.
China's economy grew a year-on-year 9.6 per cent during the second quarter of this year, slowing from the 9.8 per cent growth in the first quarter, after the government announced it had achieved initial results in its macro-control measures to curb over-investment.
"The overall performance of the economy was good," Wang said.
However, some prominent problems in the economy have not been fundamentally rooted out, he said.
Energy and transportation bottlenecks, possible rebound in fixed asset investments and the fast decline in money supply and loans are still troubling, he said.
Niu Li, a senior economist at the State Information Centre, said the government should also be alert to a further price rise, as price pressure has already become very large.
"While food prices remain at a high level, international oil prices are rising rapidly," he said.
International oil prices rose as high as US$53 per barrel during the past week.
"There are also signs that raw material prices may rebound," he said.
The price rise would have a certain negative impact on ordinary people's lives, Niu said.
However, the National Development and Reform Commission said on Saturday growth in the country's consumer prices would drop in the fourth quarter.
The consumer price index, policy makers' key inflation gauge, rose a year-on-year 4 per cent during the first eight months of this year, earlier figures indicate.
This means Chinese citizens have already suffered a negative interest rate, according to Qi Jingmei, another economist with the centre.
"A negative interest rate would result in people's lower expectations for the future," she said.
A negative interest rate also leads to a decline in bank deposits, she said. "This will make their purchasing power drop."
"Some low-income families have even begun to worry whether their income can meet the basic needs for food and clothing," Qi said.
"Their health could also become at risk, because they will buy the cheapest products and not pay enough attention to the quality of food."
Qi added the impact of the price rise was greater in rural areas.
Although farmers' per capita cash income rose 16.1 per cent year-on-year during the first half of 2004, retail sales in rural areas grew only 9.1 per cent, 5.6 percentage points lower than urban areas.
The government should not neglect ordinary people's feelings and interests, she said.
The government should manage to raise the renminbi interest rate to increase people's confidence in the future.