Bloomberg News

China ‘Hard Landing’ Worries Unneeded, State Researcher Says

September 28, 2011

(Updates with researcher’s comment in second paragraph.)

Sept. 28 (Bloomberg) -- China faces no risk of a “hard landing” even as its growth is set to slow as the global economic outlook worsens and labor and land costs rise, a government researcher said.

“Worries that China’s economy may see a hard landing are unnecessary,” Lu Zhongyuan, deputy director of the State Council Development Research Center, said at a briefing in Beijing today. “China is currently going through a short-term moderation and growth is still within a normal range.”

Lu said China’s economy this year may expand more than 9 percent after rising 10.4 percent in 2010, while average growth over the next five years will likely exceed 8 percent.

Policy makers of the world’s second-largest economy are trying to cool inflation while sustaining growth as a deepening debt crisis in Europe and faltering growth in the U.S. threaten to sap export demand. A Chinese manufacturing index due on Oct. 1 will probably stay near the borderline between expansion and contraction in September, according to the median estimate of 12 economists surveyed by Bloomberg News.

China needs “relatively fast growth” in order to create 8 million to 9 million new jobs a year in the five-year period that lasts until 2015, he said. It will be more difficult in the long run for China’s economy to grow 9 percent to 10 percent annually, Lu said.

‘Inevitable’ Slowdown

It’s “inevitable” that the average growth rate will slow in the next five-year period starting 2016 and may “moderate further” after that, he said. Still, Lu expects the average rate of expansion will likely stay above 7 percent.

Inflation, while still high, had peaked in July, Lu said. The increase in the consumer price index eased to 6.2 percent in August, after reaching a three-year high of 6.5 percent in the previous month.

“The domestic cost of labor, land and resources are rising, leading to a gradual slowdown of economic growth,” he said.

The government can consider keeping the tone of its economic policy unchanged for the next year while strengthening its focus and flexibility, Lu said. China has adopted a “prudent” monetary policy and a “proactive” fiscal policy.

Turning to the property market, Lu said it’s in a “deadlock” as demand remains strong even after the government limited the number of homes one can buy and tried to cap price gains, Lu said.

--Li Yanping, with assistance from Victoria Ruan in Beijing. Editors: Ken McCallum, Brendan Murray

To contact Bloomberg News staff for this story: Li Yanping in Beijing at yli16@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net


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