Policies to dampen economic growth
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Economic growth is likely to slow down in the second half of the year due to policy tightening but is not expected to see a hard landing, analysts said Monday.
The economy is estimated to grow around 10 percent in the second quarter after seeing a peak of 11.9 percent in the first quarter, while gradually declining to 8-9 percent over the rest of the year, Yan Jin, a Shanghai-based economist with Standard Chartered Bank (China), told the Global Times Monday.
Investment growth will decline later this year due to a series of tightening measures that have cooled credit growth and property market, Yan said.
The purchasing managers' index (PMI) expanded at slower pace in June for a second consecutive month, showing orders and production are slowing.
The severity of the global financial crisis and complications within the economic recovery have exceeded expectations, Premier Wen Jiabao also said over the weekend.
China's macroeconomic controls face growing challenges due to a need to cope with long-existing structural problems, he added.
Economists remain confident about a soft landing despite a decline seen in economic growth.
Both Standard Chartered and USSecurities have kept their GDP forecasts for this year at 10 percent.
The government won't push too hard with the policies given the continued uncertainty over economic growth, Yan said.
The government may slightly adjust its credit-tightening measures that curbed investment, while continuing an active fiscal policy and a moderately loose monetary policy, said Lu Zhengwei, a senior economist with Industrial Bank in Shanghai.
There is little possibility of interest rate hikes this year, Yan said.
While the real deposit rate has actually dropped below zero, we do not expect any rate hike in the next few months, Wang Tao, head of China research at USSecurities, also said in a research note July 1.
Bank lending will grow on pace with the government's target, which should help keep inflation under control, she said.
Analysts said economic growth would see further decline in 2011. Standard Charted cut its forecast for GDP growth in 2011 to 8 percent from 9 percent. USSecurities said GDP is estimated to grow at 8.7 percent in 2011.
Official economic data for the second quarter will be published on July 15.
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