China not likely to suffer sharp fall in growth in H2

By Leo Zhang  |   2008-7-18  |     NEWSPAPER EDITION

CHINA won't see a sharp drop in its economic growth in the second half as investment and consumption are likely to rise to partly offset weaker export expansion, economists said yesterday.

The central government is not likely to loosen its tight monetary policies in the short term but is expected to refrain from raising interest rates, they said.

Besides, the country may push forward fiscal policies, including raising tax rebates, to bolster exports, they added.

Investments on China's mainland are on track to rebound as rebuilding efforts in the regions that have been hit hard by the devastating earthquake in May have started.

Urban fixed-asset investments jumped 29.5 percent in June after climbing 25.6 percent in the first five months, the National Bureau of Statistics said yesterday. For the first half of this year, urban investment jumped 26.3 percent, up 0.4 percentage point from the same period in 2007.

"Investment is still the main key for the government to counter changes in external demand," said Huang Yiping, chief Asia economist at Citigroup Inc in Hong Kong. "The government has probably already increased spending on earthquake rebuilding in Sichuan Province during June."

While a weakening external demand should slow investment in manufacturing, spending on infrastructure, urbanization, resource development and environmental protection could hold up well, Huang said.

Consumption also grew rapidly in the first half of this year with retail sales rising 21.4 percent in the six-month period, a 6-percentage-point climb from the same period last year, the statistics bureau said yesterday.

The growth rate in June reached 23 percent, the fastest pace since the bureau began compiling the figure in 1999.

Urban disposable incomes advanced 14.4 percent to 8,065 yuan (US$1,200) for the first half from a year earlier.

Lower forecasts