China to maintain 9 pct GDP growth-economist

Beijing, Mar 16: China's economy will continue to grow by at least 9 per cent a year in 2006 and 2007, but policy makers will have to be vigilant about the spectre of deflation, a prominent economist said on Thursday (Mar 16, 2006).

Justin Lin, an economics professor at Peking University, told a forum that he thought accelerating income growth and steady investment would continue to stoke China's economy, which has grown by an average 10 per cent a year for the past three years.

''I'm confident that China's economic growth will definitely not slow to below 9 per cent in the next two years,'' Lin said.

Lin estimated that Chinese people would consume at least 8 per cent more this year than last, providing an internal impetus to the economy, in line with the government's aim of boosting domestic demand.

He also said that as a developing country, China still had much room to invest in upgrading its industry and improving infrastructure in the countryside, providing a steady shot in the arm to the economy.

Lin estimated overall fixed-asset investment would grow by between 15 per cent and 20 per cent this year, slightly off last year's growth of around 25 per cent.

But he also issued a note of caution on deflation, saying that overcapacity in some industries and declining grain prices exerted downward pressure on prices overall.

He said the risk of a rebound in investment in overheated sectors remained on the horizon, and suggested that the government resist using administrative measures to micromanage investment, but rely instead on monetary and fiscal policy.

REUTERS