Declining exports to slow China’s GDP growth

Declining export growth, notably affected by the U.S. credit crunch, is likely to drag China’s GDP growth down to 10.5 percent this year, still above official target of 8 percent, a leading university research paper said on Monday.

China’s booming exports are likely to see a sharp decline, which will tame the 11.4 percent GDP growth last year to a slower 10.5 percent in 2008, against the backdrop of the subprime mortgage crisis and calming global economy, according to the research paper released by the Economic Research Institute of Renmin University.

The tempered figure, however, still beats the official target of 8 percent despite of government’s cooling measures, the report said.

The economic overheating risks showed signs of relief after GDP peaked at 11.4 percent last year, Deputy Dean of the Economic School of Renmin University Liu Fengliang said.

The opinion was echoed by Guo Qingwang, Dean of School of Finance in the university, reckoning the GDP will grow below 11.5 percent in the coming two years.

It said inflationary pressures will remain a tricky problem for the Chinese government after the consumer price index hit a near 12-year high of 8.7 percent in February, and with the continuous price rise in metal, crude oil, and agriculture products.

A 1 percent rise in the international energy price will lift China’s CPI by 0.1 percent, the report said.

China faces the potential risk of drastic economic fluctuation, while tackling the biggest challenges of soaring prices and mounting inflationary pressure, Premier Wen Jiabao said last Tuesday.

Wen said his government will ensure rapid yet stable economic development and at the same time effectively hold down inflation and address problems of "unstable, uncoordinated and unsustainable" development.

The report claimed slowing world economic growth, the US dollar appreciation and the credit crunch’s repercussions on China’s capital market will add more uncertainties to China’s economic outlook this year.

China’s GDP has been expanding at double-digit growth for five straight years, peaking 11.4 percent in 2007, the highest in the past 13 years. Risks of spiralling inflation and economic overheating were also rising.

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