Slower growth rate may trigger policy changes
By Joy Wang |
August 7, 2010, Saturday
|
Print Edition
Print Edition
CHINA'S rapidly moderating economic growth may prompt the country to switch to a more supportive policy stance in the third quarter, the National Association of Financial Market Institutional Investors has said.
It predicted the central bank may reduce the reserve requirement ratio, the share of deposits a bank must set aside as reserves, in the next two months.
The report said China's economy has been largely growing in line with government targets. Macro-economic policies such as cooling the property market, reducing energy-intensive projects and controlling local government finance reflected the principle of "assurance and control" in the economic blueprint.
But the fast weakening economy in the second quarter made it necessary to reverse the policy stance back to support growth, the association said.
"The vast construction of urban infrastructure may become a new driver for growth when the government insists on control over housing and pollution," the report said.
China's gross domestic product increased 10.3 percent from a year earlier in the second quarter, down sharply from the surge of 11.9 percent in the first three months.
The State Information Center, a unit under the National Development and Reform Commission, China's top economic planner, forecast growth may slow to 9.2 percent in the third quarter.
The pressure of growth may mount against the background of a stronger yuan, fewer exports under the worsening global trade environment and policies to reduce energy consumption, the report said, and thus the possibility of a cut in the reserve ratio is increasing, which will help boost liquidity on the market and stimulate the economy.
The central bank has lifted the reserve requirement ratio three times so far this year.
It predicted the central bank may reduce the reserve requirement ratio, the share of deposits a bank must set aside as reserves, in the next two months.
The report said China's economy has been largely growing in line with government targets. Macro-economic policies such as cooling the property market, reducing energy-intensive projects and controlling local government finance reflected the principle of "assurance and control" in the economic blueprint.
But the fast weakening economy in the second quarter made it necessary to reverse the policy stance back to support growth, the association said.
"The vast construction of urban infrastructure may become a new driver for growth when the government insists on control over housing and pollution," the report said.
China's gross domestic product increased 10.3 percent from a year earlier in the second quarter, down sharply from the surge of 11.9 percent in the first three months.
The State Information Center, a unit under the National Development and Reform Commission, China's top economic planner, forecast growth may slow to 9.2 percent in the third quarter.
The pressure of growth may mount against the background of a stronger yuan, fewer exports under the worsening global trade environment and policies to reduce energy consumption, the report said, and thus the possibility of a cut in the reserve ratio is increasing, which will help boost liquidity on the market and stimulate the economy.
The central bank has lifted the reserve requirement ratio three times so far this year.
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