Global downturn won't hit China badly
Updated: 2008-01-25 07:45
"A significant external slowdown would reduce the need for more aggressive tightening of China's macroeconomic policies, creating a healthier environment that would foster the needed shift toward more sustainable, domestically-driven growth."
Last year, China's central bank raised the interest rate six times, and ordered local lenders to set aside more cash in deposit on 10 occasions to curb inflation and prevent overheating.
The central government implemented a series of administrative measures, too, to cool down the economy. These steps have proved quite effective in reducing investment and production, with the GDP growth starting to decline from a record 11.9 percent in the second quarter of last year to 11.2 percent in the last.
"The government (however) could tolerate slightly faster investment growth by relaxing its macro control slightly because of the US downturn," Citigroup China economist Shen Minggao said.
Surging fiscal revenue will give the government great leeway to increase public spending when necessary, analysts said. And soaring corporate profits over the past years will give a strong incentive to domestic enterprises to build new plants and research facilities.
According to the National Statistics Bureau, the government's fiscal revenue was 5 trillion yuan ($691 billion) last year, compared to 1.89 trillion yuan ($261 billion) in 2002.
"The global downturn should help the Chinese economy to cool off without the government having to take aggressive tightening measures by resorting to blunt policy instruments," said Huang Qing, of Morgan Stanley.
Besides, domestic consumption, which the government has tried to boost, is expected to remain robust after the country's retail sales growth hit an eight-year high last year.
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