After government decisions to slash deposit interest tax and increase interest rates for third time this year, which were announced over the weekend, some economists believe all necessary regulatory policies have been put in place for the Chinese economy, and some others hold the macro control should be further tightened.

 

Despite the disagreement, they are all optimistic about the development trend of the economy in the second half of this year.

 

Some experts believed most major economic indicators for the first half year, including GDP growth, retail sales and CPI, were higher than expected. For instance, the key inflation indicator rose 4.4 percent year-on-year in June, well above the government-set alarm level of three percent.

 

Lin Zhaohui, a senior researcher with Guotai-J&A, a leading securities firm, noted China's economic growth pattern has since 2005 turned from "high-growth with low inflation" to "higher growth with relatively high inflation".

 

The economic growth in the second half year will be driven mainly by consumption, which usually peaks in the July-December period, and investment, which tend to rally.

 

Given continuous export duty adjustments, accelerated appreciation of Renminbi and faster growth in investment, foreign sales, which used to be the third economic driving force besides the above two, are likely to slow down its expansion, according to Lin.

 

Meanwhile, consumption and investment will conspire to push CPI further up, of which such counters as grain and meat prices will remain high from July to December, Lin forecast. This will exert pressure on macro economic control in the six-month period, he believed.

 

However, some other economists argued there existed no overheating in the national economy in the first half year and price hikes were due to structural factor. After deducting foodstuffs, core of the index was not high, they believed.

 

Xie Fuzhan, head of the National Bureau of Statistics, said the economic growth in the January-June period remained on a largely healthy track.

 

An economist by profession, Xie said the gap between investment growth and consumption growth narrowed more or less, as the investment growth was 3.9 percentage points lower than the year-earlier level and consumption growth was 2.1 percentage points higher.

 

Zhu Baoliang, deputy head of the economic projection department of the State Information Center, said the rapid trade-surplus growth in the first half of the year resulted from the fact that exporters had been rushing against deadlines for export tax rebates to be cut or scrapped altogether. He said the growth will slow down noticeably in the second half.

 

In the wake of the cool-down in foreign trade, related investment will experience a slowdown in growth rate too. Since no overheating will occur in the second half year, further macro control measures will be unnecessary, Zhu said.

 

(Xinhua News Agency July 25, 2007)