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October 18, 2010

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Home » Business » Economy

Solid rise in GDP but challenges abound

CHINA'S gross domestic product will grow about 9 percent next year, but the economy will be challenged by rising labor costs, liquidity problems and difficulty in sustaining rapid growth in the long run, a senior researcher at the country's top think-tank has said.

Liu Shijin, deputy director of the Development Research Center of the State Council, China's Cabinet, spoke at the OTO Fortune Forum held by the Bank of Communications on Saturday.

For 2010, Liu predicted a 10 percent GDP growth due to the economic slowdown in China during the second half of this year.

He said China's exports and investments would be improve in 2011 from this year, but the growth rate of consumption would fall slightly from this year's boom, making 9 percent growth "very likely."

To keep its economy on track for sustained growth, China still faces three major challenges in the long term.

"The first challenge comes from the rapid rise of labor costs in the country," Liu said.

"The competitiveness of Chinese companies will be threatened by rising labor costs unless they find a new source of growth, such as innovation."

The second challenge is from liquidity as China's currency, the yuan, and other non-US dollar currencies are under pressure to rise after the United States Federal Reserve indicated it would study a new round of quantitative easing of monetary policy, he said.

The greenback, which serves as the world's reserve currency, tumbled against most major currencies last week on the expected easing move by the Fed to pump more money into the US economy next month.

The third major challenge concerns whether China can keep its fast economic expansion in the future, he said.

In the next three to five years China's GDP growth will slow to 7 percent from its current 10 percent, he noted.




 

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