Business
China growth to exceed forecasts
Sunday, March 20, 2005 Posted: 11:58 PM EST (0458 GMT)
BEIJING, China (Reuters) -- China's economy will grow at an average annual rate of 8 percent from 2006 to 2010, according to a top think-tank whose forecast exceeds a well established official view that long-term growth would average 7 percent.
The new forecast from the cabinet's Development Research Centre (DRC), reported by state media on Monday, follows the government's decision not to repeat for 2005 the 7 percent growth forecast which it had routinely issued for previous years and which the economy had routinely exceeded.
Instead it is forecasting 8 percent growth for 2005, and the think-tank extended that outlook until 2010.
"China's economy will maintain average annual growth of 8 percent during the Eleventh Five Year plan period (2006-2010), boosting per capita GDP to $1,700," the China Securities Journal quoted a report by the think-tank as saying.
"Rapid capital formation will still be the key driving force for economic growth during the Five Year plan period and growth between 2010 and 2020," the think-tank was quoted as saying.
"That means China will achieve its goal of quadrupling its gross domestic product from 2000 to 2020 ahead of schedule," the China Daily quoted the centre's vice director Sun Xiaoyu as saying.
The China Daily also quoted Han Wenxiu, a senior official at the National Development and Reform Commission, as saying accelerating urbanisation and higher consumption in houses, cars and home appliances, would help underpin long-term growth.
But Zhang Xiaoji, an economist at DRC, was quoted by the newspaper as saying that China would face obstacles in sustaining its rapid growth due to energy and environment strains.
"The nation's resources and the environment are coming under greater pressure as China strives to maintain sustainable development," Zhang was quoted as saying.
"The environment will pay the price unless the country shifts from the current resource-intensive model of economic growth."
The government has been trying to narrow a rich-poor gap by spending more in rural areas and curb fixed-asset investment while promoting consumption to better balance economic growth.
Yiping Huang, economist at Citigroup in Hong Kong, agreed that China's economy would be able to maintain around 8 percent growth until 2010, but he saw it slowing slightly afterwards.
And the economy faced challenges, Huang said.
"China is very likely to maintain that strong growth, but there are issues it has to deal with," he said "I think the most important problem in the near term is over-investment."
"The longer-term problems China will have to deal with are this big question of capital efficiency, which is related to the over-investment problem but also related to the efficiency of the banking sector and the stock market," he said.
The goal of quadrupling GDP between 2000 and 2020 assumed annual average growth around 7 percent, and the government has been targeting that rate for the Tenth Five Year plan, covering 2001 to 2005.
But official data suggest that the actual growth rate for 2001 to 2005 will exceed 8 percent.
The economy was 9.5 percent larger last year than in 2003, despite government steps to hold down growth, including the country's first interest rate rise in nine years in October.
http://www.cnn.com/2005/BUSINESS/03/20/chinagrowth.rt/