Chinese economy may decelerate due to European debt crisis

New Delhi, June3 (ANI): The Chinese economy may be hit by the current European debt crisis, but a complete economic slump is unlikely, say experts.

However, market observers are also becoming increasingly anxious about the possibility of rapid economic deceleration.

"The economy is expected to decelerate from the strong spurt of growth we saw in the first quarter, but an economic slump is unlikely," Zhang Liqun, a senior research fellow at the macroeconomic research department of the State Council Development Research Center, told the China Daily.

"The country secured 8 percent growth last year despite the devastating global financial crisis and there is no reason for a big economic fluctuation this year as exports recover," he said.

The domestic property market of the country is over-saturated and this has prompted the authorities to introduce a slew of restrictions and measures to check it.

"The current tightening measures are part of a necessary cooling off," Zhang said.

Zhang further said that it would be circumspect of the authorities to raise interest rates for loans as this would directly and negatively impact both consumption as well as investment by consumers.

"This year, monetary policy is aimed at mopping up excessive market liquidity while maintaining market activities, which can be achieved through open market operations and hikes in banks' reserve requirement ratios," he said.

He noted that it is no longer the government's top priority this year to pursue high GDP growth and what it does care about is how to put the economy onto a sustainable growth track. "Gross domestic product growth of 9 or 10 percent this year would be satisfactory (for policymakers)," he said.

"The main downside risk lies in the recovery of the country's external demand, which is clouded by the ongoing European crisis and the weak US economic recovery," Zhang said. (ANI)