China’s economic growth in 2012 may drop below 9 per cent for the first time in a decade, a senior Chinese foreign exchange official said today, underlining the gloom in Beijing over the deteriorating health of the global economy.
Still, Huang Guobo, the chief economist at China’s currency regulator, the State Administration of Foreign Exchange, told a forum that policy would remain focused on controlling inflation in coming months.
That echoed comments last week by Premier Wen Jiabao, who said inflation is unacceptably high.
“The Chinese economy is facing serious challenges despite strong growth,” Huang said. “The weakening global demand for Chinese exports will be a challenge...Next year, if the situation continues, China’s growth rate may fall below nine per cent.”
Huang is not the first of China’s many government economists to forecast slower growth. But his statement could signal a strengthening view in the government that growth in the world’s second-biggest economy is moderating.
Wang Jian, an economist affiliated with China’s National Development and Reform commission, known for relatively bearish views, told local Chinese media at the weekend that China’s growth could fall below eight per cent in the first half of 2012.
The outlook would not be welcomed by policymakers elsewhere because China’s growth during the global financial crisis played a key role in underpinning the world economy.
China’s economy expanded in 2010 by 10.3 per cent and during the global crisis years of 2008 and 2009 maintained annual growth of more than nine per cent.
The last sub nine-per cent expansion was in 2001, when GDP rose by 8.3 per cent.
China’s economy relies heavily on demand for its exports from the likes of Europe and North America, so financial markets are pricing in a slow down.
A Reuters poll in July showed analysts expect China’s economic growth to slow from 9.3 per cent this year to 8.8 per cent next year.
Such a slowdown would be within Beijing’s threshold. The country’s five-year economic blueprint allows for growth of seven per cent a year on average through to 2015.
Wen was quoted last week saying that an economic slowdown was expected and even desirable in the fight to combat inflation, which was 6.5 per cent in July.
Huang said policymakers needed to keep their focus on inflation because an increasing amount of hot money will flow into emerging markets, a common worry among China analysts, many of whom expect the United States to launch a new round of quantitative easing.
“Globally, we see weakening growth. Also, this year, the sovereign debt crisis has worsened, particularly in Europe. This has greatly undermined global confidence and has also caused volatility in the global markets,” Huang said.
“Facing such a slowing economy and the sovereign debt crisis, I think there is a dilemma. Fiscal policy cannot be massively used and monetary policy has already been eased.”
Many private economists have cut their growth forecasts for China sharply because of concern that weakening global growth will take a bite out of exports.
They see eight per cent growth as critical. Growth below that level may not create enough jobs to keep up with China’s rapidly urbanising population, they say.
