A consensus estimate produced by 17 Chinese and foreign institutes is that China's gross domestic product (GDP) will grow 10 percent and the consumer price index (CPI) will rise 6.1 percent during the third quarter, down 0.1 percentage points and 1.7 percentage points, respectively, from the second quarter.

"The government's tight monetary policy is beginning to work to bring down inflation with the quickened pace of renminbi appreciation and a slowdown in money supply and GDP growth, " Lu Feng, a professor at Peking University and one of the forecasters, said on Monday.

"The dramatic increase in demand since last year was driven by money supply growth," said Song Guoqing, another Peking University economist. "However, statistics released in June showed a steady downward trend in money supply.

"Besides, a large portion of the 'hot money' is deposited in banks to profit on interest rate and foreign exchange rate differentials. Plunging stocks have caused wealth losses. These are being translated into a slower pace of fund circulation," said Song.

"Considering changes in the pace of fund circulation and money supply, the growth rate in overall demand is expected to continue slowing," Song observed.

China's GDP grew 10.6 percent in the first quarter and 10.1 percent in the second, with 10.4 percent growth for the first half of 2008. The CPI stood at 7.9 percent in the first half.

(Xinhua News Agency July 28, 2008)