China’s growth to slow to 10.4 percent this year: report

June 17th, 2008 - 7:36 am ICT by IANS  

Beijing, June 16 (Xinhua) China’s economy will grow at a slower rate of 10.4 percent in 2008 because of lower external demands and tightening of domestic policy, a report said Monday. The country’s gross domestic product (GDP) last year touched a growth rate of 11.9 percent last year, the fifth year of double-digit growth.

The economy had now started shifting to a slowdown from a record growth curve, said the study conducted by Renmin University of China (RUC) and Donghai Securities.

The GDP grew 10.6 percent in the first quarter, down 1.1 percentage points from the same period last year on weakening external demands and the worst winter storms in more than five decades.

“This is not a short-term, temporary correction,” the China Securities Journal reported Monday, quoting Liu Yuanchun of RUC’s School of Economics.

The report suggested the government increase fiscal spending and reserve requirement rather than hike steeply interest rate in the second half of 2008 to boost the economy while taming inflation.

“The tight monetary policy can only help to adjust people’s expectations on inflation,” the report stated. “Don’t expect it to play a direct role in curbing prices.”

It also advised the government to order temporary controls on grain exports and increase government subsidies for agricultural production.

Surging food prices are considered the major driver behind China’s inflation as food accounts for one-third of the main inflation gauge, the consumer price index (CPI).

The CPI eased to 7.7 percent in May as food prices started to fall after surging in the past year. The reading was 8.5 percent in April, up from 8.3 in March and down from the 12-year high of 8.7 percent in February.

The report added the CPI might rise 7.1 percent, well above the government target of 4.8 percent, and the trade surplus fall by $3.4 billion for all of 2008.

The surplus dropped to $20.2 billion in May, down 10 percent from a year ago. Last year, it surged 47.7 percent to a record $262.2 billion.

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