Moderate GDP growth expected

By Wang Yanlin  |   2008-6-20  |     NEWSPAPER EDITION

CHINA'S gross domestic product will likely moderate to a more sustainable pace of 9.8 percent in 2008, the World Bank said yesterday, a revision from its previous forecast made in April of 9.4 percent for this year and 9.2 percent for 2009.

"While economic activity in China has moderated in line with the global economy's slowdown, real expansion of exports and imports remains robust," the bank said in its latest China Quarterly Update yesterday.

"Sharply higher prices are inflating import values and bringing down China's trade surplus, even as the contribution of net trade to growth remains positive. Despite less buoyant investment, the update shows that China's domestic economy is holding up well." The report found headline inflation was receding even as non-food price pressures emerged.

"In fact, food price increases are starting to fade from consumer price data. Some spillover from the higher food prices is flowing into wages and some other prices, while an impact is expected from recent industrial commodity and oil price rises."

Despite this, a general spillover to consumer prices has been limited and headline consumer price inflation was tipped to recede generally.

China's gross domestic product expanded 10.6 percent in the first quarter, cooling from last year's 11.9 percent. In May, the country's Consumer Price Index, the main gauge of inflation, eased to 7.7 percent from a nearly 12-year record of 8.7 percent in February.

"Amid weaker and uncertain global prospects, China's growth will be supported by strong international competitiveness and a robust economy," said David Dollar, the World Bank's country director for China.

But Dollar believes that China's exports will continue to grow as they are supported by the nation's extremely competitive products.