China's economy will probably grow by about 8% this year, the central bank's research bureau and other economists forecast on Tuesday, the latest expressions of confidence that authorities can engineer a soft landing.
Many independent analysts have predicted a sharp slowdown for the world's fourth-largest economy, to as little as 5%, as factory output growth grinds to a halt and exports shrink in the face of falling demand in the United States and Europe.
However, government officials and researchers have begun to centre on the view that China can maintain growth of 8% this year - the pace Beijing considers necessary to create enough new jobs to preserve social stability.
The research bureau of the People's Bank of China added its voice to that consensus, saying it expects a relatively modest slowdown from its estimate of 9.3% growth for all of 2008. The economy expanded by 9.9% from a year earlier in the first nine months of 2008.
The researchers, led by Zhang Jianhua, head of the central bank's research bureau, also said consumer price inflation was likely to slow to less than 3% from 6% in 2008.
Writing in the official Shanghai Securities News, the team cautioned that the threat of deflation was on the rise, fuelled in part by weakness in property investment and overseas demand.
“To effectively counter the risk of rapidly accelerating deflation, the key is to fully implement all manner of policies to expand domestic demand and support growth, and to speed up reform of pricing of basic goods,” they wrote.
Other government researchers also said it should be no problem to “protect eight,” a shorthand slogan for the desired 8% growth rate that is being used daily in domestic media as Beijing seeks to buoy consumer and investor confidence.
In a question-and-answer report in the state-run Outlook (Liaowang) Magazine, three government economists gave roughly similar forecasts for growth this year.
Jia Kang, a researcher with the Ministry of Finance, said growth would probably be around 8.5%, and “no lower than 8%.”
Zhang Yansheng, an economist with the National Development and Reform Commission, said growth would come in at about 7.5% to 8%. Wang Xiaoguang, also with the top planning agency, gave a forecast of 8.3%.
A blunt warning about a potential surge in unrest due to rising unemployment, carried by the same magazine, drove home why authorities are so keen to prop up growth.
“Without doubt, now we're entering a peak period for mass incidents,” it quoted Huang Huo, a senior reporter with the official Xinhua news agency, as saying, using the official euphemism for riots and protests.
To cushion the slowdown, authorities have launched a 4 trillion yuan ($586 billion) stimulus package, repeatedly cut interest rates and vowed to boost domestic consumption to buffer the economy from declines in investment and overseas demand.
However, Fan Gang, the academic member of the central bank's monetary policy committee, said the stimulus package, which is concentrated on public investment in infrastructure and housing, would do little to boost consumption.
He said China was unlikely to reverse the low contribution of consumption to its GDP growth in the short term as household income was rising slowly due to fierce competition in the labor market, which was capping salary growth.
To counter that trend, Fan said firms should pay more tax on the resources they use and state firms should be required to pay higher dividends. The government should then redistribute the proceeds to households so people have more disposable income.
“In the long run, China really needs to rely on its own consumption demand to make up for weakening demand for exports,” Fan told reporters. “We need to have a sense of urgency.” (Reuters)