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China Think Tank Sees Third-Quarter Growth Stabilizing

China's economic growth is expected to stabilize in the third quarter, helped by a shift of government policy towards sustaining growth, a major government research institute said on Friday.

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CNBC.com
China, Chinese Flag

Gross domestic product is forecast to expand 10.2 percent in the third quarter, after growth fell to 10.1 percent in the second quarter from 10.6 percent in the first, the State Information Centre said in a report carried by the official China Securities Journal.

Second-quarter growth, hit by slowing rises in exports and tight quotas for expansion of bank lending, was the lowest since the fourth quarter of 2005.

But the centre, part of the National Development and Reform Commission, the top economic planning agency, said China's economy remained likely to expand rapidly because of huge supplies of manpower and capital and rising competitiveness of Chinese companies.

"Under the guidance of macroeconomic policies, China's economy will be able to sustain steady and relatively rapid growth," the centre said.

Since late July, statements by the cabinet and President Hu Jintao have indicated China is shifting the focus of economic policy to sustaining growth from fighting inflation. Bank lending quotas were eased last week.

The centre also predicted consumer price inflation of 6.6 percent in the third quarter, down 1.3 percentage point from average inflation in the first half of this year.

It urged the government to focus more on stimulating domestic consumption and monitoring macroeconomic risks.

One risk is that the U.S. dollar appears to have begun strengthening globally and the United States may raise its interest rates, which could spark fund outflows from emerging economies including China, the centre said without conmmenting directly on the yuan's exchange rates.