China's economy is not overheating -govt economist

BEIJING, May 23 (Reuters) China's economy, though racing ahead rapidly, is not showing the classic symptoms of overheating, a senior government economist said in remarks published on Wednesday.

China has registered double-digit growth for four years in a row.

The economy grew 11.1 percent in the first quarter compared with a year earlier on the back of booming investment and exports, sparking concerns that the pace was unsustainable.

But Zhu Baoliang, a senior economist at the State Information Center, a key government think-tank, estimated that China's potential economic growth had accelerated to 11.3 percent in 2006 from 9.5 percent in 2002.

''Overheating is when the GDP growth rate exceeds its potential level and prices keep rising by over 5 percent (annually),'' he was cited by the official China Securities Journal as saying.

An economy's potential growth rate defines the point beyond which inflation will accelerate. Zhu said China's potential had increased due to intensified industrialisation and urbanisation.

China's consumer inflation slowed a touch to 3 percent from a more than a two-year high of 3.3 percent in March. But stripping out food, which accounts for a third of the price basket, annual inflation was just 1 percent in April.

''Core inflation is very mild now, so it's hard to draw a conclusion that the economy has overheated,'' Zhu said.

He said China's widening international payments surplus would add to pressure for yuan appreciation and make it even harder for the authorities to mop up excess liquidity and curb investment.

China's trade surplus might soar to 0 billion from 7 billion in 2006, Zhu said.

He forecast that gross domestic product growth would slow to 10.5 percent this year from 10.7 percent in 2006; he expects consumer prices to rise around 3 percent on average in 2007, fixed-asset investment 24 percent, retail sales 15 percent and broad M2 money supply 17 percent.

REUTERS KK PM0810