China Third-Quarter GDP Seen up 8.5%, No InflationCHINA, GDP, GROSS DOMESTIC
PRODUCT, ECONOMY, GROWTHReuters | 20 Aug 2009 | 09:47 PM ET China's
gross domestic product will grow about 8.5 percent in the third quarter
from a year earlier, picking up from the second quarter's 7.9 percent
pace, a government think-tank said on Friday. The
bullish forecast comes against a background of anxiety in world markets
that Chinese growth might falter as a boom in fiscal spending and bank
lending peters out. The State Information
Centre (SIC) said growth in bank credit would "normalize" in coming
months but warned that any abrupt slowdown in lending would leave many
state-backed projects unfinished and result in a new crop of
non-performing loans. New lending will
rebound to about 500 billion yuan ($73 billion) in August after
shrinking to 356 billion yuan in July, the official China Securities
Journal reported. In a report carried in
the same paper, the SIC said China would stick to its "proactive"
fiscal policy and "appropriately loose" monetary stance in the second
half of the year. "China's CPI has been
falling for many months and it's a fact that mild deflation exists, so
there is no basis for China to alter its monetary policy," the
think-tank, which comes under China's economic planning agency, said. It
forecast that the consumer price index (CPI) would fall 1.3 percent
this quarter from a year earlier and the producer price index would
decline 7.9 percent due to the high base of comparison in 2008. The SIC said
the Chinese economy has bottomed out but is still growing below potential,
mainly due to weak exports. Exports
would fall 20 percent in the third quarter, compared with a year
earlier, with imports dropping 12.7 percent, the think-tank forecast. Capital
spending would remain a key driver for the world's third-largest
economy, and urban fixed-asset investment was likely to rise 32 percent
in the third quarter, it said. Strong
investment is exacerbating many deeply rooted problems, including
over-capacity, the think-tank said. It listed steel and cement as
sectors with serious over-capacity. "It is extremely bad for China's future
industrial restructuring and upgrading," the SIC said. It said property
investment could potentially replace government spending as the next key driver
of growth. Copyright 2009 Reuters. Click for restrictions.
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