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China forecasted to expand above 10% next year

Wednesday, December 6th 2006 - 20:00 UTC
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China's growth next year is forecasted to exceed 10% and consumer prices should be in the range of 1.5% according to the latest estimates from the People's Bank of China, reports the Chinese agency Xinhua.

The forecast is similar to that released by the central bank in its third quarter monetary report last November 14.

According to Xinhua Chinese authorities are concerned with the country's accumulation of international reserves (over a trillion US dollars), which "complicates monetary policy and puts pressure on exchange rates".

Beijing officials are also considering making economic growth more dependent on domestic expenditure rather than in exports and foreign investments.

Apparently China's central bank reiterated its commitment to contain the excessive expansion of credit and the gigantic trade surplus of the country.

Li Yang Director of the Institute of Finance and Banking of the Chinese Academy of Social Sciences anticipated China would adopt a neutral monetary policy allowing the Yuan to fluctuate within a wider ban and thus appreciate.

China's main trade partners have consistently complained that the Yuan is undervalued between 15 and 40%.

"Prospects of China continuing its current monetary policy will diminish greatly", added Li who also anticipated growth would decline slightly.

"Growth rate could drop to 10.1% next year". China's growth decreased to 10.4% in the third quarter from 11.3% in the second quarter.

The economist said the foreign reserves management system might be "subject to reforms", which would have a significant impact on the economy and the country's financial markets.

"The current monetary policy can only alleviate, but can not solve the root problem of liquidity" he warned. "If government functioning is not reformed, the liquidity surplus will inevitably increase."

Other priorities for 2007, according to Xinhua, include improving the quality of economic expansion over the rate of growth with the purpose of saving energy and protecting the environment.

The announcements come a few days before a top United States official mission headed by Treasury Secretary Henry Paulson, US Trade Representative Susan Schwab, Commerce Secretary Carlos Gutierrez and possibly Fed Chairman Ben Bernanke are scheduled to visit China to discuss trade.

The visit comes ahead of data that is expected to show that US trade deficit with China has expanded beyond last year's 202 billion US dollars.

Categories: Economy, International.

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