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Central Bank Says Economy Up by 9 %

China's central bank says the country's economy will grow by more than 9 percent this year and the consumer price index (CPI) will rise by about 2 percent.


In a quarterly report, announced yesterday, the People's Bank of China (PBC) said consumption, investment and net exports, which drive the country's economy and grew by 9.4 percent during the first nine months of the year, would continue to add fuel to economic development.


A fast rise in incomes, low interest rates for bank deposits and improvements to the social security system are all expected to stimulate demand.


Urban residents also have strong confidence in income growth. A third-quarter survey by the central bank on urban depositors suggests the urban residents confidence index for future income growth increased by 1.9 points on the second quarter.


During the first three quarters of this year, the number of newly started projects increased by 23,000 or 21.1 percent compared to the same period a year ago. The total planned investment for the projects increased by 27.9 percent year-on-year.


The strong global economy is likely to continue its momentum, which is beneficial for China's export growth, the report said. But trade protectionism by some developed countries will bring uncertainties for China's exports.


The bank said the possibility that the Chinese economy would face deflation was quite small.


The CPI, which fell to 0.9 percent in September, would continue to go up but would not pick up too much, said the report.


"The inflationary pressure still exists," the bank said.


In the short term, the Chinese economy will continue to grow rapidly. Chinese residents' spending capacity will remain strong.


There is mounting pressure to adjust regulated prices for water, gas, electricity and transportation.


Changes in the way China prices resources are also about to begin. From the long term point of view, there are price rise pressures relating to labor and land. The cost of environmental protection will also increase.


The central bank's third quarter survey suggested 36.2 percent of the residents believe prices will rise. This means their expectations for future inflation has increased.


Broad money supply, or M2, would grow about 17 percent this year, faster than the 15 percent growth targeted at the beginning of the year.


New loans were expected to reach 2.3 trillion to 2.5 trillion yuan (US$283-308 billion).


The bank reaffirmed its commitment to keep the renminbi exchange rate stable.


But it said it would beef up the role of supply and demand in determining the rate.


The bank also said it would keep a tight check on capital inflow while expanding the channels for foreign exchange to leave the country.


China will also roll out various initiatives to help firms, banks and individuals hedge against new-found exchange rate risks, the bank said.


(China Daily November 10, 2005)


China's Economy to Grow 9.3% in 2005: World Bank
No Drastic Slowdown with Falling CPI
State Info Center: Growth to Slow Next Year
China's Rapid Economic Growth Will Continue: OECD
Economy Softlands Successfully
China Free from Deflation, Inflation: NBS
GDP Up 9.5% in First Half
China's Economic Growth Not Deflating
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