China’s economy to grow moderately slower in 2008

The economy would be affected by a decelerated world economy, weakened by outside demand and domestic disasters such as the snowstorm in January and February and the 8.0-magnitude earthquake in southwestern China, said the People’s Bank of China (PBC) in a report on its website. It noted that the country’s central areas, the hardest-hit by the snow storm, need to strengthen infrastructure such as power, transport and telecommunications facilities. Post-quake recovery work was also an arduous task, it said.

Official data showed the freak winter had led to a direct economic loss of 151.6 billion yuan (about $20.8 billion), while economists estimated the quake loss could reach hundreds of billions of yuan.

The government would continue to carry out a tight monetary policy and properly control bank credits this year, according to the report. Innovative, conservative enterprises as well as rural and service sectors should enjoy preferences in getting loans while lending to smokestack, polluting and overproducing industries must be checked, aid the PBC. “More priority should be given to curbing price rises and preventing inflation,” it said. The PBC suggested increasing supplies of grains, edible oil, meat, eggs and vegetables to rein in surging food prices.

China will see its annual gross domestic product growth slow down to 9.8% this year and 8% in 2009, compared with 11.9% last year, according to a forecast by Lehman Brothers. Individual housing credit risk, which had triggered a US sub-prime crisis, would be basically under control in China in the short term, the PBC noted. It said the default risk caused by inadequate economic ability to repay the housing loans was relatively small in China, while most borrowers had good credit.

The average proportion of down payment in housing loans was 37.2% in the country, while only 3.7% of surveyed house buyers were unable to repay the loans in time because of money shortage, according to the PBC report. Meanwhile, the country’s commercial banks could face larger risks from borrowers, who repay their housing loans in advance due to interest rate hikes and income rises, which would add uncertainties to the banks’ fund use plan, it said.

Outstanding housing loans to individuals reached 2.7 trillion yuan as of the end of 2007, 36.1% up year on year and accounting for nearly 10% of all loans in the country, said the PBC. (Xinhua)