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HSBC upbeat on Chinese economy
( 2004-01-14 11:34) (China Daily by Sun Min)

The Chinese economy is expected to maintain momentum in 2004 and reach a growth rate of 7.5 per cent, a chief economist at the Hong Kong and Shanghai Banking Corporation (HSBC) predicted yesterday.

Geoffrey Barker, HSBC's Asia-Pacific head of research and chief economist, also dismissed concerns of an overheating economy in China, saying that there was over-investment only in certain sectors. China has, along with the United States, been a major engine in the global economy over the last two years or so thanks to the extraordinary boom in capital expenditure in the country, said Barker at a press briefing in Beijing yesterday.

This trend has propped up the demand for equipment and raw materials, which lead to higher prices.

Another effect of the hike in capital expenditure has been an increase in the supply of such products in other markets and helped them ease deflation, he said.

China's economic growth, which had already reached 8 per cent in 2002, is expected to have attained the 8.5 mark last year, according to the latest prediction from Qiu Xiaohua, deputy director of the National Bureau of Statistics.

Rapid business expansion in some sectors has triggered demand for energy and metal products and made China increasingly influential in setting the price of such commodities on the global market.

With the economy performing strongly, there had been worries that the economy was overheating and that inflation was on the rise. But Barker said the over-investment in a limited number of sectors would only affect some individual markets.

He predicted that industrial activities growth in China will slow down from 17-18 per cent presently to 10-12 per cent in 2004.

However, the Chinese authorities are in control of capital investment so the economy would be able to manage a soft landing, he said.

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