OREANDA-NEWS. July 25, 2011. The Strategic Management Department of Agricultural Bank of China Limited (“ABC”) launched the Semi-annual Report on China's Macro-economy in 2011 (“the Report”) in Beijing. The Report points out that the current economic slowdown is effected by macro-control, elements supply shock and enterprises “to-inventory”. Chinese economy will still have enough growth momentum in the next half year and not be “hard landing”, reported the press-centre of ABC.

ABC expects that China's GDP growth will reach 9.5% in 2011. In terms of the three driving forces of the economy, investment will continue to maintain rapid growth, with the expected investment growth rate of 25.1%. The forceful local government investment impetus, the accelerated real estate investment driven by government-subsidized housing construction and the continuous rapid growth of private investment will sustain the fixed asset investment. Consumption growth will remain stable but experience a slight decrease, where main consumer goods growth will be gradually stabilized, consumption growth in rural areas will continue to accelerate and service consumption will increase robustly. The expected annual growth rate of total retail sales of consumer goods will be 16.4%. Export growth will continue to slow down, with annual export growth rate of 23% and trade surplus of USD159 billion, which will exert negative impact on GDP.

The Report figures out that, the inflationary pressures in the second half year are still relatively great and the annual CPI growth rate will be 4.8%. The current inflation is manifested by the overall rise of prices, which is different from the previous one. CPI will reach 6.4% in July, a record high across the year, and then gradually decline, due to falling M2 growth rate, eased imported inflation, weakened carryover effects, improved inflation expectation and other factors. However, high pork price, further reform of resource product prices, upward trend of housing prices and wage increases will push forward inflationary pressures throughout the year.
The Report also predicts that we need not worry much about China's economic growth in the short term, but structural problems deserve our concern in the long run, which should be addressed in the first year of the Twelfth Five-Year Plan period.

The current structural problems mainly include the reemergence of industries with high pollution and energy consumption and overcapacity, slower industrial restructuring and more difficult situation for SMEs. China should accelerate the transformation of development mode and the pace of economic restructuring.

As for the economic policy trend in the next half year, ABC said in the Report that, the proactive fiscal policy and prudent monetary policy still needs to be held  as the main theme, and the macro-control direction needs not be quickly changed. Interest rate hikes are still necessary in the next half year, 1-2 times as appropriate and 25 basis points increase each time. Deposit reserve ratio shall be also increased 1-2 times according to the circumstances, and then remain stable, to prevent over-adjustment. The exchange rate of RMB against USD will continue to appreciate in the next half year, with increase rate of about 5% in full year. Fiscal policies should focus on support in the key areas and actively serve for economic restructuring.

The Report also indicates that real estate control policies should be improved constantly to remain its continuity and stability. This is not only a test for the government to win credibility of public policies, but also a long-term strategy to curb speculative investment demand, restore the consumer attribute of real estate and stabilize the housing price.