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Economic growth of 6.5 percent predicted

CHINA'S economy will probably grow by 6.5 percent in the first quarter of the year as stimulus moves help counter the economy slump, the State Information Center said in a report today.

"In the first quarter, the economy will still be in a slowdown but the central government's series of stimulus packages will help counter the slump,"the affiliate of China's top economic planning agency, the National Development and Reform Commission, said today.

In the fourth quarter of 2008, China's economy slowed to 6.8 percent, a seven-year low.

The strengthening of the purchasing managers' index for January and February showed some recovery of industrial output and imports of some raw materials rose, indicating higher demand, the report said.

The CLSA China Purchasing Managers' Index, a measure of conditions in the manufacturing industry, rose to 45.1 in February from 42.2 in January, though it was still below 50 which indicates deterioration.

Industrial output growth will probably hover around 7 percent, still a comparatively low level, the state council said. The 2008 whole-year figure was 12.9 percent.

Economists expect a further slowdown this year though they are divided on how sharp the decrease will be. The central government is targeting an economic growth of 8 percent this year.

"The Chinese economy is yet to reach bottom. Economic data to be released this week will show a further slowdown in the first two months of the year," said Sherman Chan, a Moody's economist, today.

China is scheduled to post the consumer price index, the money supply and export figures for February tomorrow.

First-quarter exports will likely drop 9 percent from a year earlier while imports will slump 25 percent, leading to an almost doubling of the trade surplus to US$80 billion, according to the State Information Center.

"Exports are perhaps the only category the Chinese cannot revive on their own," said Chan.

In 2008, the net exports contribution to the economy slowed to 0.8 percentage points from 2007's 2.6 percentage points.

Corporate China's investment growth is expected to slump in the first quarter as sluggish external demand not only weighs on productions orders, but also discourages business expansion.

China's economy slowed to 9 percent in 2008, down 4 percentage points on a year before, the sharpest annual drop in two decades.


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