Opinion

Slowdown ahead, but no hard landing

(China Daily)
Updated: 2010-07-07 09:55

 

Zhang Jianhua

Zhang Jianhua, director of the research bureau of the People's Bank of China

Inflation will not be a major problem for China this year, with year-on-year growth of around 9 percent, if we make a conservative estimate.

But inflationary expectations still exist and the inflation rate currently exceeds the benchmark one-year deposit rate.

Related readings:  Slowdown looming but no double dip  What to expect from market this year  Is China's economy headed for a hard landing?  No 'hard landing' for China

Negative real interest rates will not affect the economy in the short term, but, in the long term, will trigger resource misallocation. Therefore, we should carefully monitor the movement of inflation especially after massive amounts of liquidity were injected into the market last year. The effect of liquidity will surface sooner or later and we must deal with it.

Chinese economic growth will moderately slow down in the second half of this year, but there is no need to worry about a "double-dip" slowdown. Many economists agree that gross domestic product (GDP) growth in the first six months could reach 11 percent.

If this is the case, China could easily maintain 9.5 percent annual growth, if it can secure 8 percent growth in the second half of the year.

Even though the global economic crisis is yet to end, China's exports have been growing at a relatively fast pace, rising at an annualized 20 percent in the first five months. Property investments in major cities and second- and third-tier cities will continue to support China's overall investment. With China's per capita GDP exceeding $3,000, the time is ripe for the country to take steps to spur consumption.

Moreover, as China implements its pledge to cut emissions, this will also bring huge investment opportunities, which will contribute to economic growth.