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July 5, 2007

China’s economy to grow 10.9pc in 2007

 
July 5, 2007

SHANGHAI: Growth in China’s roaring economy is expected to continue apace this year, rising 10.9 per cent, a government think tank report said on Wednesday, urging further economic cooling measures.

The projected annual growth is slightly higher than 10.7 per cent in 2006, supported by strong consumption and high levels of fixed-asset investment, said the State Information Centre, a research arm of the National Reform and Development Commission.

“The trend is of an economy that is moving from a bias of fast growth to overheating,” the report published in the China Securities Journal said, adding that the economy was still in an “ascending period” of the cycle.

The country needs to further tighten macroeconomic controls in the second half, with monetary policy generally stable but needing “appropriate tightening” to ensure economic growth remains rapid but stable.

It said that current real interest rates are comparatively low and that the central bank should raise the benchmark lending and borrowing rates and also increase the reserve requirements of banks.

The central bank hiked interest rates twice this year and five times required commercial banks to place more money in reserve in an effort to cool inflation, fixed-asset investment and stock market speculation. In addition, the central government should consider removing the tax on interest income from bank deposits, the centre said, a move aimed at staunching the flow of savings into the stock market acccounts.

The report also forecast that growth in China’s trade surplus, would slow in the second half as tax rebates and the appreciation of the currency, which makes exports from China more expensive, bite. The trade surplus is expected to hit $275 billion in 2007, up 55 per cent from last year, a slower pace of growth than from January to May when the trade surplus jumped 83.2 per cent from a year ago to $85.72 billion.

The state statistics

bureau is scheduled to announce second quarter data on July 18 at a quarterly press conference. China’s economy recorded growth of 11.1 per cent in the first quarter.