China’s economy remains sound & stable

Beijing(China)—China's macro economy has remained sound and stable with the trend of overheating growth being reined in.
"Overheating economic growth is being put under control with decline in the growth of major economic indicators," said Li Xiaochao, spokesman of the National Bureau of Statistics(NBS). Official statistics show the growth of fixed assets investment in urban areas in the first ten months was 4.5 percentage points lower than the same period last year.
Industrial production, which plays a leading role in economic growth, showed a sharp drop in growth rate and a steady increase in profits. Official statistics show the country's industrial production grew by 14.7 percent year on year in October, compared with 19.5 percent in June, while the profits rose by 30.1 percent in the first ten months, compared with 28 percent in the first half year.
Analysts say the regulation by market forces is not enough and it should be combined with necessary fiscal and administrative measures, because China's economy is in a period of transformation with market system underdeveloped and regional development unbalanced. The galloping expansion of China's bank loans has been controlled with the growth of broad money supply or M2 gradually dropping from 18.4 percent in June to 16.8 in September.
Li said China's macro economic regulation is timely and effective without drastic fluctuations. The prices rose slowly and the energy supply was much improved. A survey by NBS showed most large and medium-sized enterprises did not consider tight energy supply as a major factor restraining their business development in the third quarter.
"The macro economic regulation policies will continue and remain stable in the fourth quarter and the near future to build a solid foundation for economic development next year," said Zhu Hongren, senior official with the National Development and Reform Commission. However, the growth of fixed assets investment and bank loans is likely to rebound, the imbalance of the international payments is widening and the country still faces serious challenges of environmental protection.
A think tank at People’s University has forecast China’s economic growth will slow to about 9.25 percent in 2007 and remain near that rate through 2010, the Beijing News reported on Sunday. In its first macroeconomic report, the university’s Economic Research Institute predicted China’s gross domestic product ( GDP) would pull back from projected annual growth of about 10.48 percent this year in response to government cooling measures.
The estimates for 2006 and 2007 were roughly in line with a range of recent economic forecasts from various economists polled by Reuters. “Judging from the medium and long-term views, the macro-economy of China will end its prosperity stage of this economic cycle, but there will be no deflation or stagnancy,” said Liu Yuanchun, an analyst at the institute who prepared the report. The researchers predicted consumer inflation would be 1.5 percent in 2006 while annual fixed-asset investment growth would hold near 27 percent.
At a briefing to release the report on Saturday, Wu Xiaoling, vice governor of China’s central bank, praised the report for its “high quality,” the newspaper said. Liu predicted that annual GDP growth in the fourth quarter will be 9.62 percent, down from 10.4 percent in the third quarter and 11.3 percent in the second quarter.
“If the current stable financial and monetary policies can be maintained and the government adopts some selective contraction policies, then the national economic growth will keep the trends of the second half of this year, and the GDP growth rate next year will drop to 9.25 percent,” he said.
The report projected annual GDP growth would remain slightly higher than 9 percent through 2010.

—The Daily Mail-China Daily news exchange item