Powerful China's Economic Growth may slip to 8.6% this Year

26.02.2012

China's economic growth may slip to 8.59 per cent this year due to slowing in Europe, while inflation will ease to 3.3 per cent, according to a Xiamen University and National University of Singapore joint forecast.

Growth may bottom out in the second quarter, slowing to 8.35 per cent before picking up again, according to the forecast released yesterday at a forum in Beijing. Expansion in first quarter may be 8.42 per cent, down from 8.9 per cent in the final three months of last year.

China's growth is decelerating as Europe's sovereign-debt turmoil hurts exports and Premier Wen Jiabao continues trying to cool his nation's property market. Last month's decline in overseas sales and weaker-than-forecast lending raised concerns that the world's second-biggest economy may see a sharper slowdown.

"There are many external uncertainties out there," Mr Wang Yida, a deputy director at the Ministry of Finance, said at the forum. "We should be wary about the downward pressure on economic growth brought about by sluggish external demand, although the nation's economic fundamentals remain sound."

Mr Wang said the government will further improve the policy of "structural tax cuts" and boost spending in areas including energy conservation, education and technology to help spur domestic demand.

The forecast said the central bank may cut interest rates in both second and third quarters, by 25 basis points each time, trimming the one-year benchmark lending rate to 6.06 per cent.

Inflationary pressure will ease "significantly" as domestic economic growth moderates, the yuan continues to appreciate and external demand weakens, the forecast also noted. Pace of the yuan gains will decelerate as a narrowing trade surplus and slowing capital inflow ease pressure on yuan appreciation, it added, and China's currency may trade at 6.23 to the US dollar by the end of this year.