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Chinese economy to grow 9.28% in 2011

Source:   Time:

The Chinese economy will grow by 9.28 percent in 2011 if the United States can stay out of a double- dip recession and the eurozone can steer itself clear of a sovereign debt crisis this year, economists from China's Xiamen University and the National University of Singapore said in their latest forecasts released on Saturday.

The China's Macroeconomic Outlook 2011-2012 and Policy Simulations report also projected that the consumer price index (CPI) inflation will hit 5.34 percent for the full year.

Slowdown inevitable

It forecast a GDP (gross domestic product) growth of 8.91 percent and a CPI growth of 4.93 percent for 2012.

"We think that China's GDP growth will inevitably slow down at the stage it is at, due to weak recovery in the external markets and the macroeconomic policies gradually coming back to normal in China," the report said.

"The Chinese economy is most likely to grow at a range between 9 percent and 8 percent for some time to come," said Li Wenpu, an economist from Xiamen University and one of the leaders of the research.

Chen Kang, professor of economics from the Lee Kuan Yew School of Public Policy, National University of Singapore, said that the forecasts were based on "prudently optimistic" assumptions that the United States economy will grow by 1.7 percent this year and further bounces back to achieve a normal speed of growth and that the eurozone will stay out of a sovereign debt crisis this year and slows down a bit next year, dragged by the deepening crisis.

The interest rates in China is assumed to stay stable this year and the money supply M2 grows by 16 percent this year and 17 percent in 2012, respectively.

Impact from possible US double-dip recession

If the United States slips into a double dip recession in the first and second quarters of 2012, with the economic growth lower at 1.1 percent, however, the Chinese economy will grow by 8.24 percent in 2012, 0.67 percentage point lower than the base forecast.

The forecast was based on a slowdown in eurozone and China cut its interest rates by 0.25 percentage point early next year.

The CPI inflation will also be lower at 3.95 percent, the report said.

"Given the complex factors leading to the inflation, it will take quite some time for it to be stabilized. The inflation will stay high at 4 percent to 5.4 percent this year and next year," it said.

The researchers said China should keep its hand tight on inflation and avoid excess investments aimed at too fast growth of the economy by stimulating it.

Xiamen University and the National University of Singapore have been releasing their forecasts for the Chinese economy twice a year since 2006. They also partnered with the Economic Information Daily of China to release the forecasts in China.

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