MercoPress. South Atlantic News Agency

Chinese economy keeps expanding above 9%

The Chinese economy is forecasted to decelerate slightly in the second half although overall 2005 growth will remain at a quick pace given the massive influx of foreign investment and greater credit flexibility, according to the China Securities Journal.

GDP is expected to reach 9,4% in 2005 but next year should contract to 8,9% says a report from the Chinese Social Sciences Academy. This means that second half growth will slow down from the 9,5% recorded in January-June 2005. The Academy forecasts consumer inflation at 1,9% this year and 2,1% in 2006.

China so far has managed eight consecutive quarters at over 9% and analysts forecast that the third 2005 quarter will also show a vigorous expansion given recent monetary, trade and investment figures.

China's Central Bank reported that money supply expanded 17,9% in the last twelve months ended September 30, which is considered high and could be a signal that authorities are flexing their tight control over credit.

"There's been some deliberate flexibility from the Central Bank, particularly in the first half of 2005 when they were beginning to be concerned with expansion", said Paul Cavey an analyst in Hong Kong. Cavey forecasts the Chinese economy will finally expand 9,3% this year and 8,5% in 2006 given government efforts to control overheating in investment and other sectors.

China announced this week that September's direct foreign investment was 5,3 billion US dollars representing 3% increase over the same month a year ago.