Sound, stable growth forecast

By Xin Zhiming (China Daily)
Updated: 2009-02-24 06:51

The central bank said yesterday that China's economic growth would likely remain "sound and stable" despite projections the global economy would continue weakening.

In the short term, however, the country faces deflation risks and continued downward pressure on economic growth, the People's Bank of China's monetary policy report said. Covering the fourth quarter of last year, the report was published on the bank's website yesterday.

"With its vast domestic market, China has marked potential for economic growth, and its long-term growth trend remains sound and unchanged," the report said.

"The macroeconomic regulation policies, meanwhile, will help ensure the country's stable and relatively fast economic growth."

Last year's fourth-quarter growth slumped to 6.8 percent, triggering widespread concern that the country's growth could dip to as low as 6 percent this year, as some overseas investment banks have forecast.

Because China will take every measure to keep the downward growth trend buoyant, it is unlikely the country would experience a hard landing, analysts have said.

The country adopted a 4 trillion yuan ($586 billion) economic stimulus plan in November before putting in place a series of policies boosting specific sectors, such as automobile-manufacturing and real estate.

Fiscal policies would also play a major role in boosting economic growth this year. Reportedly, the country's fiscal deficit would amount to a historical high of 950 billion yuan this year.

"More tax cuts would also be discussed at the upcoming National People's Congress session and approved afterward," China Southwest Securities analyst Dong Xian'an said.

The central bank admitted the turbulent international economic environment would put pressure on China's economic growth.

Economists have warned the financial crisis' second round, with more mortgage defaults and even closures of major commercial banks in the US, will hit the world economy and inflict greater damage than the subprime crisis.

"The US and other developed economies would be in a prolonged recession," Global Business and Finance Institute director Song Hongbing said.

Domestically, "external demand is shrinking; overcapacity is surfacing in some sectors; companies are facing operational difficulties; and urban unemployment is rising," the central bank report said.

"We will appropriately use tools like the interest rate and deposit-reserve rate to ensure reasonable monetary and bank credit growth."