BEIJING - Economists
around the world have agreed that China's
decision-makers face a tricky situation this year
as they attempt to maintain sound economic growth.
Many analysts have cut the country's growth
forecasts in recent weeks to reflect weak global
demand.
The unfolding global credit crisis
that began with problems in the US subprime
mortgage sector has led to a global slowdown just
as China faces increasing domestic inflationary
pressure, they said.
On Wednesday, the
Asian Development Bank lowered its 2008 forecast
for China's economic growth to 10% from 10.8%.
That revision came a day after the World Bank cut
its 2008 forecast for China by 0.2 percentage
points to 9.4%. This is the second time
in two months the World
Bank has revised down its projections.
Less than a week ago, the United Nations
Economic and Social Commission for Asia and the
Pacific said in a report that China's economic
growth would decelerate in 2008 because of slowing
exports and the government's cooling measures.
Investment banks including Goldman Sachs
and China International Capital Corp have also
agreed that growth will be lower, indicating
rising concerns over the impact of slower world
demand and rising domestic inflation.
"The
continued global slowdown under the impact of the
US credit crisis in the past two months was the
major reason behind our further cut to China's
forecast economic growth," said Louis Kuijs, a
senior economist with the World Bank. The bank two
months ago cut its 2008 China growth forecast to
9.6% from 10.8%.
"The Chinese economy is
faced with a complicated mix this year," Kuijs
said. The US financial turmoil and the ensuing
global slowdown, rising international energy,
industrial materials and food prices, and domestic
inflationary pressure were major risks to the
Chinese economy, he said.
Premier Wen
Jiabao admitted at a press conference last month:
"This year might be the most difficult one for the
Chinese economy. There are many unpredictable
factors at home and abroad, so decision-making
will be very difficult."
Kuijs pointed out
that the expansion-oriented policies needed to
deal with weak external demand due to the credit
crisis and the tightening policies needed to fight
domestic inflation were "contradictory" to each
other.
"This would make China's
macroeconomic controls more complicated, and the
art and competence of the government's macro
control efforts will be tested," he said.
The World Bank said in a report on Tuesday
that the damage caused by the US financial turmoil
to the global economy and to trade and capital
flows was highly uncertain.
China's rising
inflation rate, however, is not expected to ease
for March or the entire first quarter. Inflation
figures are to be released in mid-April. The
consumer price index rose to nearly a 12-year high
of 7.1% in January and 8.7% in February.
The government will have to address three
issues: imbalances between domestic and external
demand, mounting energy and environmental
pressures and widening urban-rural income gaps, in
order to achieve an economic soft landing this
year, said Zhuang Jian, a senior economist with
the Asian Development Bank mission in China.
"China needs to focus on expanding
domestic consumption to avoid an economic
fall-off," Zhuang said.
However,
economists also agreed that the driving forces of
China's economy, like investment and consumption,
would remain robust this year despite the
slowdown.
"The overall steady economic
situation will offer much flexibility for the
country to coordinate its tight monetary policy
and prudent fiscal policy," Kuijs said.
China will try to keep its economic growth
at 8% with inflation at about 4.8% this year,
according to targets set by the cabinet, or State
Council. The People's Bank of China, the central
bank, said late last month that the country will
maintain its tight monetary policy, which will be
adjusted in response to changes in the domestic
and world economies.
The central bank has
raised the bank reserve requirement ratio twice so
far this year. It also drained 3.6 trillion yuan
(US$514.3 billion) in open market operations in
the first quarter, in an apparent drive to absorb
excess liquidity.
The government will
continue to improve macro controls with a prudent
fiscal policy, a tight monetary policy and efforts
to curb rising prices, the State Council said in
its latest bulletin on key tasks for 2008.
It also pledged to increase investment in
agriculture, boost economic restructuring and
improve people's living standards.
The
country had rolled out a series of measures to
fight inflation after China's government was
reshuffled last month. Among the latest such moves
were increased farm subsidies to boost production
and curb grain price hikes.
(Asia
Pulse/Xinhua)
na confirms inflation enemy number
one (Mar 6,
'08)
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