China's economy is likely to grow at a slower pace in the first half of this year but the possibility of a hard landing is "extremely slim," a government think-tank said in a report yesterday.
China's economy is expected to grow 9.5 percent year on year in the first six months, compared with 11.1 percent in the same period of last year, the State Information Center said in a report published in China Securities Journal.
The center expected growth to continue slowing in the second half and forecast a 9.3 percent rise in gross domestic product for the year, compared with 2010's 10.3 percent.
China's manufacturing growth slowed between January and May as a result of the government's tightening policies and the phasing out of stimulus measures, the center said. But the deceleration was "moderate and at a stable pace," it noted.
Despite the anticipated slowdown, demand remained robust.
The retail sector is likely to see 16.7 percent growth in the first half and 17 percent for the whole year, compared with last year's 18.3 percent, it said. Fixed-asset investment jumped 25.8 percent in the first five months from a year earlier and will continue to grow at a rapid pace in the second half thanks to numerous affordable housing projects, the center said.
However, inflation will remain an obstacle amid efforts to restructure the economy. Inflation is "certain to hit a record" in June, the center said, after it hit a 34-month high of 5.5 percent in May.
In the second half, rising costs could push up prices further, the center warned, putting its inflation forecast at 5.3 percent for the first half and 4.9 percent for the year.
The government's inflation target for the year is 4 percent.
Meanwhile, the center encouraged the government to carry on its prudent monetary policies to rein in inflation to gradually lift real interest rates out of negative territory, the center said.
The one-year deposit rate is at 3.25 percent. It's far below inflation, which means millions of depositors, mostly low and middle-income earners, are losing money by putting their money in banks.
The center sees slower growth in exports from July to December as the yuan appreciates while labor and financing costs rise.