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Economic growth on stable upward curve
By Zhang Dingmin (China Daily)
Updated: 2004-11-17 00:54

China's economic growth will relent but stay on a stable upward curve in the fourth quarter of the year, the central bank said Tuesday.

It will enable the State's macro management targets to be met.

However, the People's Bank of China (PBOC) says macro-management -- which has the goal of creating a more sustainable pace of economic growth -- is still at a critical juncture.

The bank has pledged to maintain its prudent monetary policy stance.

"Currently, macro-management is in a critical stage. We need to continue to closely watch the trends in various price indices and prevent investment growth from rebounding, so as to safeguard and build upon the achievements of macro-management," the PBOC said yesterday in its third-quarter monetary policy release.

Observers are watching China's progress in its efforts to bring the fast-growing economy down for a soft-landing.

The authorities have taken a slew of measures to harness the more than one year of frenzied fixed investment and loan growth, which many fear may finally push already accelerating prices to unbearable levels and erode economic growth.

But as the tightening measures took hold this year, with money and investment growth sliding more abruptly than expected, worries emerged that economic growth could drop off dramatically.

The PBOC did not provide a specific forecast for full year gross domestic product growth in yesterday's report, but other official sources said it would be no lower than 9 per cent.

The economy grew by 9.5 per cent in the first three quarters of the year, which was 0.6 percentage points greater than the same period last year.

Consumption, a key driver of economic growth, will deliver strong support in the fourth quarter, with Chinese residents expecting their incomes and expenditures to rise, the PBOC said.

Its third-quarter survey of urban depositors found the Future Income Confidence Index was sitting at 17.4 points, up 1.8 points from the previous quarter and 1.4 points from a year earlier.

And fixed investment, which many fear may drop too abruptly to undermine economic momentum, looks unlikely to seriously affect economic growth in the fourth quarter.

Fixed investment projects suspended or cancelled in this year's State-led consolidation only account for a meagre 5.9 per cent of all fixed investment, the bank said.

"The enthusiasm to expand investment remains high across the country, and there is a possibility that fixed investment growth may rebound," the PBOC said.

The report said consumer prices will ease off a bit in the fourth quarter, but warned data in the first three quarters has shown little sign that inflationary pressures had been alleviated noticeably.

The expected increase in grain supplies will help contain rises in prices, the major forcing driving this year's consumer price index (CPI) inflation -- but the increases in producer price index will eventually be passed onto the CPI, it said.

"Our preliminary estimate is that the annualized CPI increase for the entire year will be around 4.1 per cent," the PBOC said.

The index, policymakers' key barometre for inflation, rose from 3.2 per cent in January to September's 5.2 per cent. The increase for the first three quarters was 4.1 per cent.

The central bank underlined higher inflation expectations among residents, citing its third-quarter urban depositors' survey which found that more than 40 per cent of residents expected prices to move up in the fourth quarter.

The central bank announced its first interest rate increase in nine years late last month, which analysts say was partly intended to alleviate a persistent erosion of consumers' quality of life.

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