Chinese economy to have rosy prospect amid uncertainties
(Xinhua)
Updated: 2008-03-08 15:21

BEIJING -- China's economy in 2008 will maintain a robust and stable momentum despite uncertainties ahead, according to signs revealed during the country's top legislative and political advisory sessions.

Justin Lin, chief economist-designate to the World Bank, answers questions from the press on Friday. [China Daily]

Liu Shucheng, a political adviser and director of the Economic Research Institute of the Chinese Academy of Social Sciences (CASS), believes it is almost out of question for China to score 10 percent of gross domestic product (GDP) growth this year.

"China's economy has maintained a long period of continued and stable growth, which is unprecedented since the founding of New China (in 1949)," he said.

Justin Yifu Lin, a deputy to the National People's Congress (NPC) and the World Bank's chief economist, holds a similar view, saying China's economy would be affected little by the U.S. subprime crisis.

"The demand by the United States, China's second largest trade partner, would not decrease by a large margin as most of Chinese exports to it were low- and middle-end," Lin said.

Despite the sound economic expansion on the whole, Zhang Quan, an NPC deputy and head of Shanghai environmental protection administration, held that China should be fully prepared for the uncertainties ahead.

"Risk prevention capability should be further strengthened. Just as an old Chinese saying goes: be prepared for danger in times of safety," he said.

In his government work report at the NPC session, Premier Wen Jiabao said, "There are quite a few uncertainties in the current economic situation home and abroad, so we need to keep close track of new developments and problems, properly size up situations and take prompt and flexible measures to respond to them while keeping our feet firmly rooted in reality."

China's GDP in 2007 reached 24.66 trillion yuan, an increase of 65.5 percent over 2002 and average annual increase of 10.6 percent. However, the consumer price index (CPI) in 2007 rose 4.8 percent year-on-year, the highest since 1997 and well above the 3 percent target, mainly due to rises in food and housing costs. In January this year, monthly CPI rose 7.1 percent, the highest monthly surge in the past 11 years.

Meanwhile, the U.S. Federal Reserve cut interest rate six times in seven months. The European Central Bank (ECB) held key interest rate steady for fears of further inflation in the eurozone as inflation remained a record high of 3.2 percent since the beginning of the year.

In general, the impact from U.S. subprime crisis on global economy is not clear. And there is no consensus on how international oil price and price hikes would impact on inflation.

Under such circumstances, Premier Wen called for the appropriate pace, focus and intensity of macroeconomic regulation to sustain steady and fast economic development and avoid drastic economic fluctuations.

The premier said China would strive to keep this year's CPI increase at around 4.8 percent while following a prudent fiscal policy and a tight monetary policy.

As the U.S. newspaper International Herald Tribune observed from the premier's report, the price hike has become the top concern of Chinese government. The main task is to rein in growing inflation and prevent the economy from being overheated.

China's top economic planner, central bank governor and financial minister gathered at a press conference on Thursday to explain government measures to regulate macro-economic growth and contain rising inflation.

To prevent fast economic growth from becoming overheated growth and keep structural price increases from turning into significant inflation, the People's Bank of China raised the reserve requirement ratio by half of a percentage point to 15 percent on January 25, the highest since 1984. In 2007, the central bank had raised the ratio ten times and benchmark interest rate six times.

Economists believe the measures is to ensure sound economic growth and stabilize market anticipation of inflation. The central government has regarded curbing price hikes as the "rigid lever" for this year's macroeconomic regulation while saving room for economic structure adjustment.

For low-income earners, who are affected most by growing inflation, a protective umbrella will be provided by the government that advocates "putting people first".

"I believe the government will make greater efforts to solve social issues and improve people's livelihood through increasing fiscal revenue and making use of other resources," said Jia Kang, a political advisor and director of the Research Institute for Fiscal Science under the Ministry of Finance.

Indeed, Premier Wen's report showed unusual concern on the issue of prices, and came up with nine measures, short- and long-time, to increase effective supply and curb unreasonable demand.

These measures include expanding production, especially the production of the basic necessities of life such as grain, vegetable oil and meat as well as other commodities in short supply, speeding up improvement of the reserve system, promptly improving and implementing measures to aid the low-income sector of the population and to make sure that the prices of the means of production, particularly agricultural supplies, do not rise rapidly.