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China’s growth, inflation expected to slow

SHANGHAI – CHINA’S economic growth and consumer price inflation are expected to slow moderately this year as cooling policies take effect and food supplies increase, a major government research institute forecast yesterday.

Gross domestic product growth is projected to ease to 10.8 per cent this year from an estimated 11.4 per cent last year, the State Information Centre said in a report published by the official Shanghai Securities News.

The centre, which is part of the National Development and Reform Commission, the top economic planning agency, predicted that consumer price inflation would drop to about 4.5 per cent for all of this year from an estimated 4.7 per cent in 2007.

The third and fourth quarters of last year saw the peak of food price inflation, and food prices should now rise more slowly as agricultural investment and production pick up, the centre said.

However, producer price inflation – prices at factory gates – is actually expected to rise, to 3.5 per cent from 2.9 per cent.

The centre cited rising prices of energy, raw materials and labour, and said that overall, industrial profits would trend downwards this year because of such pressures.

Growth in China’s trade surplus will slow this year, given overseas protectionism, uncertainty about the strength of the United States economy and policy steps taken by Beijing such as the abolition of export tax rebates and faster appreciation of the yuan, the centre forecast.

It estimated the trade surplus at US$328.4 billion (S$472.3 billion) this year, up 22.5 per cent from US$268 billion in 2007. That would represent a slower rise than last year’s estimated 51 per cent leap of the surplus.

China’s export growth is expected to slow to 19 per cent from 25.7 per cent in 2007, helping to slow growth in urban fixed asset investment to 24 per cent from 26.3 per cent, the centre said.

Investment in the real estate sector is forecast to ease to 25 per cent growth from 29.5 per cent.

The centre’s major forecasts were broadly in line with previous statements by other government officials and agencies.

Source: REUTERS (The Straits Times 3 Jan 08)

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