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China has potential to grow by 7%-8% annually in 2 decades

By Xin Zhiming (chinadaily.com.cn)
Updated: 2009-03-21 14:50

It remains too early to claim that China's economy has started to recover, although in the long run it still has the potential to grow by 7-8 percent annually, said economists at the China Development Forum today.

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Economic indicators have shown initial signs of an economic recovery in China, such as the purchasing managers index (PMI), which has been on the rise for the third consecutive month in February. The fixed-asset investment and retail sales have also remained strong in the first two months.

"However, we may need to look at the indicators in March and the first quarter as a whole (to see whether a real recovery has come)," said Zheng Jingping, statistician from the National Bureau of Statistics.

The fixed-asset investment, for example, had dropped dramatically in the first two months of 2008 due to the severe storms in a large part of the country, which may have made this year's investment look exceptionally high, he said.

The global economic financial crisis, meanwhile, is still worsening and the world economy may contract by 0.5-1 percent this year, which will affect China's economic growth, he said.

China's export slumped by 17.5 percent and 25.7 percent in January and February respectively.

Lawrence Lau, president of the Chinese University of Hong Kong, said at the forum that China's export would remain resilient and rebound soon.

"Orders for Chinese products have dropped, but it would be a short-term phenomenon," he said. The US consumption has been on the decline, but it would decrease dramatically. Moreover, China's export of mainly low-end products would remain welcome in the overseas markets despite the financial crisis, he said.

Lau said China's ample resources, such as labor and high savings rate, would provide back-up for its long-term sustainable growth. "China has the potential to have its economy grow by 7-8 percent (annually) ... in the upcoming 10-20 years."