China needs careful policy calibration to maintain robust growth

16 December 2011 04:58  [Source: ICIS news]

SHANGHAI (ICIS)--China will have to tweak its monetary and fiscal policies a little to ensure the world’s second biggest economy keeps to its high single-digit growth pace next year amid fears of another global economic recession, analysts said on Friday.

On 12-14 December, the China’s leaders met in Beijing to devise economic strategies for the coming year amid expectations of weakening external demand.

Analysts widely expect the Chinese economy to pull an 8-9% GDP growth next year, representing a slowing down from the government’s target of 9.8% expansion for 2011.

The global economic outlook is bleak going into next year, with the eurozone mired in a debt crisis, while the US – the world’s biggest economy – remains in the fragile state.

China must take a proactive stance in its conduct of monetary policy next year “to face the grim and complicated global economic environment”, said Wei Tao, an analyst from brokerage Quanjing Securities.

The country can afford to slightly loosen its monetary policy, analysts said, as inflation pressures have somewhat eased, and as the economy has started to show strains from a domestic credit crunch, which has been hampering trades, including those in the petrochemical sector.

Inflation in the country at 4.2% in November, was the lowest recorded for this year, bringing the 11-month average to 5.5%, official data showed. The increase in consumer prices rose to as high 6.5% in July, before tapering off.

On 5 December, China cut the banks’ reserve requirement for the first time in about three years to inject back liquidity into its financial system.

Some analysts believe that there will be more such moves in 2012, reversing the country’s monetary tightening stance, with expectations that inflation will continue easing down to average below 4% next year.

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By: Dolly Wu
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