China Economy to Grow More Than 11%

China's massive trade surplus will remain high for 2007 as well.

Although China's economy will expand by more than 11% this year, its blistering growth could soon be slowed by a host of economic uncertainties, the central bank said Nov. 8.

In its latest quarterly economic outlook, the People's Bank of China said surging inflation and the snowballing subprime credit crisis in the U.S. posed risks to future expansion in the world's fastest-growing major economy. "Uncertainty in the global economy has increased the potential risks to the domestic economy," it said.

It said pressure on food prices was easing, but warned that potential further climbs in world grain and oil prices could exacerbate already historically high inflation. The bank said it expects full-year consumer price inflation to grow by 4.5% -- up from 1.5% in 2006 and 4.1% in the January-September period this year.

Worried about economic overheating and social unrest over inflation, China's government has repeatedly pledged to rein in runaway growth. But a series of interest rate hikes and other steps have proved largely ineffective. The economy roared ahead by 11.5% both in the third quarter and the first nine months of the year.

Rising labor costs and "irrational" property price gains could trip up the economy, the bank said in the report published on its website, calling for tighter controls on house prices. It warned that government efforts to lift price controls -- as it did on November 1, when fuel costs were raised 10% to counter a supply crunch -- could add to inflation.

China's massive trade surplus will remain high for 2007, according to the report, which also predicted the growth would moderate. The surplus hit $185.7 billion in the first three quarters, exceeding 2006's full-year record of $177 billion.

Copyright Agence France-Presse, 2007

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