Inflation and a trade surplus will remain key issues in China's
economy this year while volatility is also expected with economic
growth, economists said before the government is due to release
last year's economic data this week.
"High volatility but limited upside will be the main
characteristics of the China economy this year. We expect the China
economy in 2008 to be as volatile as it was in 2007, or even more
so," said Credit Suisse in a report yesterday. "But we expect the
upside to be more limited (below 10 percent)."
The Switzerland-based bank views the positive factors as roughly
balanced with the negative ones.
It forecast China's gross domestic product will remain strong,
around 10 percent, against the backdrop of a bleak global growth
environment. The yuan's appreciation and ample liquidity will
contribute to the country's growth.
The negative factors include risks of rising inflationary
pressure and tighter government policy regarding property.
"We expect the consumer prices to rise from 4.7 percent in 2007
to 6.5 percent this year, as inflation expectations are building up
very rapidly and are supported by a sharp surge in base money in
the balance sheet of the central bank," said Credit Suisse.
It estimated the one-year lending rate to rise from the current
7.47 percent to 8.34 percent by the end of 2008 while the yuan will
stand at 6.75 against the greenback at year's end.
Liang Futao, an analyst at Shenyin Wanguo Securities Research
Securities Co, shares some of Credit Suisse's views.
"To contain inflation and the trade surplus are two key issues
this year in the master plan of China's tighter monetary policy,"
He expected China's export growth to slow by 20 percent due to a
not-so-rosy global economic outlook and more trade barriers.
Last year, China's trade surplus jumped 47.7 percent from a year
earlier to a record high of US$262.2 billion, according to the
General Administration of Customs.
Liang predicted the trade surplus this year will grow at a much
slower pace of 12.5 percent to US$306.3 billion.
He posted a moderate estimate for consumer prices and said they
may expand by about four percent.
China's main gauge of inflation jumped to an 11-year high of 6.9
percent in November and pushed the combined figure for the first 11
months last year to 4.6 percent.
China has raised interest rates six times last year and has just
announced another rise in banks' reserve requirement last week to
cool the world's fastest growing economy and rein in inflation.
(Shanghai Daily January 22, 2008)