China GDP growth to exceed 11% in 2010

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China's gross domestic product would exceed 11 percent this year before slowing to just under 10 percent in 2011, the Paris-based OECD predicted Tuesday in its Economic Outlook report.

The organization forecast China’s speedy growth to continue in early 2010 and attributed the smaller growth rate in 2011 to a phasing out of the stimulus package.

Deteriorating trade and still-strong domestic demand would cut current account surplus sharply in 2010, while the inflationary pressure was likely to remain subdued with mitigation in food prices, the report said.

It confirmed that the Chinese government's policies had brought significant growth in the housing market, transport construction and non-government investment.

Higher food and commodity prices had lifted inflation to a high level in the year to April but the OECD expected a moderate rise of 2.5 percent in the consumer price index over the whole year and little movement in 2011.

Judging from China’s official presentation, the organization commented that China’s fiscal policy was becoming more neutral and restraints on credit had been introduced.

Although governmental fiscal stimulus was set to diminish further and domestic demand was likely to ease in the following quarters, investment in the private sector would remain strong and domestic demand was sufficient to boost economic growth, thus the OECD was confident of continued strong growth for the whole year and 20111, the report said.

However, it also warned that overheating had recently started to become more of a risk, and suggested the government take measures to cool the property market as well as allow a gradual appreciation of the Chinese yuan against a basket of currencies.

OECD Chief Economist Pier Carlo Padoan would not comment on the top priority for China in fighting overheating but underlined that “to control the bubbles in the housing market is very important.”


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