Economists: China's economy still in shape

It's too soon for government measures to spur the economy, with momentum likely to remain strong despite the recent slowdown, economists said.



The economy has grown at an average 10.8 percent over the past five years, making it the fastest growing economy in the world. But a tight monetary policy and the worse-than-expected global slowdown has put the brakes on growth after it peaked at 11.9 percent in the second quarter last year.



The country's GDP growth slowed to 10.8 percent in the second quarter, compared with 11.9 percent for 2007. Meanwhile, external demand, a key driver of China's economic expansion, is likely to dry up further in the months ahead. Some analysts have warned there is risk of recession and called for more stimulus packages.



"The economy is not really weak," Huang Yiping, an economist with Citigroup, wrote in a research note. "China needed economic stimulus policies during the Asian financial crisis, but it doesn't need them now."



Retail sales were up 23.3 percent in July, the strongest increase in the past 10 years, Huang said. Meanwhile, fixed-asset investment growth also picked up in July to 29.2 percent, compared with 26.8 percent for the first half.



"There is no question that economic activities are already starting to decline," Huang said. "But they should rebound somewhat in the fourth quarter when these restrictions are removed and when the fine-tuning measures begin to work."



"Given the 9.9 percent growth this year and the 8.6 percent forecast for next year, China's economy really has no need for stimulus at this point."



According to a quarterly survey by the National Bureau of Statistics, 64 out of 100 economists estimate growth will be slower than 10 percent for 2008. But the average prediction is 10 percent.



"This year is the start of a slowdown phase," Wang Yiming, an economist with the National Development and Reform Commission, said. "But the fundamentals propelling China's economy, such as urbanization and infrastructure investment, will remain in the years ahead."



China's economic growth has mainly been led by its coastal areas, which have turned themselves into export powerhouses. But coastal provinces such as Guangdong, Zhejiang and Jiangsu were among the first to feel the pinch when the world economy began to lose steam as a result of the subprime crisis.



Meanwhile, economic growth is picking up in the vast inland regions, especially the central and western provinces. In the first half, the lowest GDP growth recorded across the six central provinces was 11.8 percent. Four of the six provinces, including Anhui, Hubei, Henan and Jiangxi, notched up a growth rate of more than 13 percent year-on-year.



This growth is largely due to the surge in fixed assets as the provinces invest in infrastructure such as roads, rail and airports. Fixed-asset investment in the central provinces surged 35.3 percent year-on-year, much higher than the nation's average of 26.3 percent.



"Growth in the inland areas could help cushion the impact of the coastal slump," Zhuang Jian, an economist with the Asian Development Bank, said.





Source:China Daily