A leading US investment bank predicts China's economy will
continue its impressive growth over the next couple of years as the
country's consumers start to spend more.
Goldman Sachs said its upbeat forecast for the Chinese economy
for 2007 and 2008 is "partially due to an expected improvement in
global demand, but also and more importantly, led by continued
solid growth in domestic demand."
The report forecasts China's gross domestic product will grow by
9.8 percent in 2007, and 10 percent in 2008.
"If our forecast materializes, this would have been the longest
and least volatile cycle China has enjoyed since 1978," the report
says.
It notes China is now in the middle of its third productivity
boom since1978, when China started its reform and opening-up
drive.
Thanks to the profound opening-up and deregulation efforts made
by the government since China's entry into the World Trade
Organization, the country's real economy has become much more
flexible and market-oriented compared with the last cyclical boom
more than 10 years ago, the report says.
"The significant decline of the state-owned enterprise's share
in production and employment has arguably led to much more flexible
products and labor markets, contributing to a higher trend growth
rate as well," the report adds.
It says China's macro policy management has improved
substantially, mainly attributable to a central bank that now
commands a much better understanding of macro issues and has a
broader range of tools to conduct monetary policy.
"Even though quantity rationing, or so-called administrative
tools, continue to be heavily relied on to rein in inflationary
pressures, the central bank has managed to 'stay on the curve' with
much fewer hiccups than during past cycles, thereby helping reduce
the volatility of the cycle," the report says.
Goldman Sachs says its macro forecasts for 2007-2008 are based
on a policy trajectory that involves two 27-basis-point interest
rate hikes (for both the deposit and lending rates), and a 5.7
percent appreciation of Renminbi against the US dollars in 2007,
and one 27 basis point rate hike plus a 5.3 percent yuan
appreciation in 2008.
"We believe these adjustments are likely to be only interim
steps towards a neutral policy stance, and therefore, risks for
growth in the next 2-3 years will likely continue to be on the
upside," the report says.
China's National Bureau of Statistics has put the country's GDP
growth in the first three quarters of 2006 at 10.7 percent.
Various institutions including the central bank have forecast a
growth rate of over 10 percent for the whole year 2006.
(Xinhua News Agency December 5, 2006)