Stocks News
- Growth slows but more curbs in store
Date: 26-Oct-2007 Sources: (Shenzhen Daily)
THE country's economic growth slowed a touch in the third quarter but not enough to dispel expectations of more interest rate rises and other policy curbs to stave off the risk of overheating.
Annual growth in gross domestic product eased to 11.5 percent in the third quarter, bang in line with forecasts, from a 12-year high of 11.9 percent in the April-June period, the National Bureau of Statistics said Thursday.
The outcome leaves China on course to grow this year at the fastest rate since 1993, when the economy expanded 13.1 percent, and brings it closer to overtaking Germany as the world's third-largest economy.
'Industrialization, urbanization and China's global manufacturing power are the three engines that continue to drive very high growth,'said Chen Xingdong, chief economist at BNP Paribas Peregrine.
The Shanghai stock market was down almost 4 percent on the day, in part as investors priced in higher borrowing costs. The central bank has already raised interest rates five times this year.
The tightly controlled yuan rose to its highest level against the U.S. dollar since it was revalued in 2005.
'I expect an interest rate rise any time. It's safe to say there'll be one more rise this year. I'd not be surprised if there were two,'said Chris Leung, an economist with DBS in Hong Kong.
GDP over the first three quarters expanded 11.5 percent from the same year-earlier period, virtually ensuring that 2007 will mark the fifth consecutive year of double-digit growth.
In another sign of its global clout, China this year is contributing for the first time more than the United States to world growth, according to the International Monetary Fund.
Although that is a source of pride for the government, statistics office spokesman Li Xiaochao said growth and inflation were still too high.
'What is needed is more attention to the quality of growth and environmental protection,'Chen at BNP Paribas said.
Still, the thrust of Li's comments suggested the pace of policy tightening will remain deliberate, not dramatic.
Li, though warning of problems, described the performance of the economy so far this year as sound and solid thanks to timely government measures such as cutting tax rebates for exporters.
'If we had not had these policies, the economy wouldn't be in as good shape as it has been in the first three quarters. We've seen all the indicators go from being overly fast to showing signs of moderating,'Li said.
Investment in fixed assets such as flats and factories slowed a bit in September, as did annual consumer price inflation, to 6.2 percent from a decade high 6.5 percent in August.
'I think the various tightening steps are beginning to take hold. Investment is still fast, but not as fast as I had expected,'said Zhu Jianfang, chief economist at CITIC Securities in Beijing.
Still, Leung at DBS said the authorities would not be able to lower their guard.
'Inflation was lower than August, but one month's figures do not mean a reversal in the uptrend. Data from the real economy would suggest otherwise,'he said.
Li said China was well on the way to attaining President Hu Jintao's goal of quadrupling per capita GDP for China's 1.3 billion people between 2000 and 2020.
To hit the target, per capita output would need to grow by 5.4 percent a year for the next 13 years. Since China introduced market reforms in 1978, annual economic growth has averaged nearly 10 percent.
But economists said Thursday's rosy report masked underlying imbalances - notably a record trade surplus that is inundating the economy with cash - that the government needed to address by letting market forces play a greater role in the economy.
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