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Experts sceptical on nation achieving 9% growth target

By Fu Jing (China Daily)
Updated: 2009-06-26 08:15

The government is providing subsidies for rural residents to increase consumption to improve their living standards and counter an economic slowdown. [Agencies]

China's economy may enter a prolonged fluctuation period by 2012 although it has basically bottomed out, according to a team of economists.

The team from the Development Research Center of the State Council has forecast that China's quarterly economy may grow between 6-8 percent by 2012 and it faces "mounting difficulties" to reach 9 percent.

If the predication is true, it means China may find it hard to overtake the average annual economic growth rate of 10.2 percent achieved in the 2001-07 cycle.

"This is my team's updated predication based on modeling results," Li Jianwei, the center's team head on macroeconomic predication told China Daily in an exclusive interview. "China will not see a steady economic upturn until 2012, when this round of global financial crisis and economic recession ends."

Based on the latest economic indicators available, Li's team has done mathematic modeling twice in March and this month to forecast China's economic growth trend till 2015 and obtained "roughly similar conclusions".

"We have no reason to be optimistic as the economy may languish if policies are not effective," said Li.

"Prolonged global economic contraction and immature domestic demand, especially consumption demand, challenge us most," said Li, who also predicated that the US would not come out of recession till 2012.

He said he would collate his findings into the mid-year economic performance report and submit it to the central government next month. To better stimulate the country's economy, China's highest leadership is currently prong through the reports from various think-tank organizations.

In spite of economic fluctuation, China's economic growth has already reached its lowest point in the first quarter of this year clocking a 6.1 percent growth, Li said.

Guo Tongxin from the National Bureau of Statistics also said China's economy has already "weathered the most difficult time" and the economy will roughly achieve 8 percent growth during April-June period.

Li said the economy would pick up in the second and third quarter of this year, but said it may slide again in the fourth quarter and in 2010.

"I don't think the current sign of recovery, mainly dependent on governmental spending and credit supply, can sustain until we stimulate private investment and consumption," Li said.

Related readings:  China's economy has bottomed out: expert  Premier: Economy at critical moment for recovery  Experts call for stimulus package for social welfare  Krugman: China needs to spur local demand

He said the external economic conditions are still deteriorating. "We should not forget how deeply we inter-depend on the markets in the US, EU and Japan, where uncertainties are huge," said Li.

Guo said China still faces a "complicated and tough" global economy, which contributed more than 30 percent to its economic growth in previous years. Citing official data, he said the US jobless rate in May has reached a 26-year high while unemployment in EU and Japan is worsening.

"The hidden financial risks are yet to fully unravel in these economies as non-performing loans and credit and mortgage defaults are also dramatically increasing," said Guo.

The World Bank has warned that China's first trade partner, the US, will not be the country's export destination as before because the US is reshaping its economic structure.

David Dollar, World Bank's China director, said the US is trying to boost savings and stimulate domestic consumption, something that would potentially decrease imports from China.

"China should keep in mind that the US will no longer be an importer (of China's goods") as before when it revamps its economic structure," said Dollar.