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Analyst says economy to grow 8%

CHINA'S economy may grow by close to 8 percent in the second quarter having hit the bottom in this round of the recession, said an analyst at the National Bureau of Statistics today.

"China's economy has shown signs of rebounding. Judging from the data, the bottom of this round of recession should have been touched in the fourth quarter of last year," said analyst Guo Tongxin in an article published on the bureau's Website.

He expects the gross domestic product of the country will expand nearly 8 percent in the second quarter, after registering a growth of 6.1 percent in the first quarter, the weakest since 1992.

He said positive elements in China's economy have accumulated under the country's proactive fiscal policy and the moderately relaxed monetary policy.

"But the external economic environment remains tough and the base of domestic demand is not quite steady, which may become obstacles for further economic recovery," said Guo.

The industrial output in May, which grew 8.9 percent from a year earlier, has returned to a level similar to October last year when the financial crisis emerged. Urban fixed-asset investment and retail sales were both running at high levels fueled by the country's stimulus actions, said Guo.

However, sagging external demand has become the major obstacle dragging down China's economy. Negative consumer prices and producer prices also showed that supply actually exceeded demand.

In the first quarter, exports dragged down China's economy by 2.8 percent, compared with an average 20 percent contribution in the period from 2005 to 2007.

The Consumer Price Index, the main gauge of inflation, has posted declines for four consecutive months by May while the Producer Price Index, the factory-gate inflation yardstick, has been in downturn for six straight months on an annual basis.

But at the same time, Guo said the country should beware of the risk of inflation with new yuan loans increasing in recent months and the prices of commodities rising significantly in the global market.

Also today, Standard Chartered Bank Ltd raised its forecast for China's economic growth this year to 7.4 percent from 6.8 percent.

"It is the mechanical result of the vast amounts of bank-financed infrastructure projects coming on line. These have clearly been front-loaded, but new projects continue to start as local governments get approvals and capital in place," said Stephen Green, a Standard Chartered economist.

"The overall economic growth has picked up and we see no significant bumps in the road this year."


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