Ping Lian: China’s Economy Expected a New Round of Rapid Growth

 date:2009-12-29 17:03:00          

China's Economy Expected a New Round of Rapid Growth

Ping  LIAN

Chief Economist, Bank of Communications

China's economy is expected to grow faster the next year. Consumption will keep growing. As the world economy recovers, export will grow. Investment will grow fast under the stimulation by central government.

The liquidity will be pretty much next year with stimulating projects and recovery of confidence. Current deposit-lending ratio of financial institutions is 67%, less than the required level 75%. Direct finance will also accelerate. Next year's nonfinancial IPOs will be 500-600 billion yuan. Bond issuing will exceed 1.5 trillion yuan. Besides, rising foreign exchange reserves will bring additional liquidity into domestic market.

There are concerns and uncertainties as well. Firstly, inflation might recur. Pork prices are rebounding again. Expectation of dollar depreciation will boost international commodity prices. Monetary expansion increases probability of future inflation. Secondly, asset prices grow fast. Stock market bubbles may come out next year. Thirdly, massive hot money may enter China. Because of China's fast recovery, expectation on rmb appreciation and asset price inflation, more capital will flow into China next year.

Monetary policy should become moderate and robust. Required reserve ratio should be adjusted. Discriminatory required reserve ratios are applicable. Lacking of flexibility, credit control is not desirable. Interest rates should be carefully managed as interest rate gap between China and abroad can accelerate capital inflow. Finally, exchange rate should be stabilized to control expectation of rmb appreciation.

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