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100 economists appraise China economy

By Hao Zhou (chinadaily.com.cn)
Updated: 2007-07-25 11:05

After the Chinese macro-economic statistics unveiled last week, a survey
published by Caijing Magazine (or Finance Magazine) this Monday covered
100 representative economists' judgments and predictions regarding the
Chinese economy and its development.

The survey was jointly conducted by the Caijing Magazine and China
Economic Monitoring and Analysis Center under the National Bureau of
Statistics.

The survey suggested that the comprehensive economist confidence index
was at 5.73, its highest since the first quarter of 2005, and that the
index had remained stable and relatively high for a year.

Because the consumer price index (CPI), a major gauge of inflation, went
up to 4.4 percent in June alone and totaled 3.2 percent in the first
half. Nearly 90 percent of the economists believed the CPI would grow
more than 3.0 percent in 2007, the original target set forth by the
government. However, most of the economists reserved their opinions ahead
of expected measures on controlling the booming CPI.

Some 84 percent of the scholars, 21 percent more than in the first
quarter, proposed further hikes in interest rates, and 82 percent
advocated raising the required reserve ratio for banks.

At the same time, over 50 percent of the economists predicted that the
international crude oil price will remain high and the renminbi exchange
rate will continue to grow at a rate below three percent.

Related readings:
?Economy grows at blistering pace
?GDP grows 11.5% in first half
?Central bank raises interest rates, cuts interest income tax
?Food price spike pushes CPI to pass 4% in June
?Regulator to bring credit growth under 15% for 2007
?Economic concerns growing among entrepreneurs, bankers

The economists also shared common ground in terms of the bullish real
estate and stock markets. Some 97 percent of them forecasted an average
of 5 to 10 percent rise in housing prices, and 83 percent expected
healthy growth in the securities exchanges. Nonetheless, 17 percent of
the economic experts, 8 percent more than in the first quarter, predicted
a drop in the stock market.

Following the announcement of economic statistics for the first half
year, the central bank slightly raised interest rates and the State
Council reduced the interest tax to 5 percent from 20 percent. Contrary
to anticipations of a slipping stock market, the benchmark Shanghai
Composite Index saw an increase of 145 points with a 3.73 percent gain
last Friday, suggesting the market had digested the policy effect and
there is no risk of a malignant overheated economy. That belief is held
by Gong Fangxiong, director of the China research department at JP Morgan
and shared by China International Capital Co Ltd.

However, Song Guoqing, a professor from Peking University's China Economy
Research Center, and Liang Hong, chief economist of Goldman Sachs
(China), insisted that the overflowing liquidity could result in
excessive inflation pressures.

Song said the industry added value witnessed a monthly 3.3 percent rise
in June, with an annualized rate of 47.6 percent, which is absolutely
unsustainable. Thus in the absence of appropriate measures, the annual
inflation rate may end at about 4 percent this year, Song said.

(For more biz stories, please visit Industry Updates)

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