Slowdown ‘won’t spin out of control’
May 30, 2011 Category Macro-economy, Weekly
China should not worry about slower economic growth because cooling measures will help to quell inflation in the second half of the year, Fan Jianping, Chief Economist at the State Information Center, said. “Such a slowdown is caused by the exit from the stimulus measures, which means it should be controllable,” the China Securities Journal cited Fan as saying. “It should be a good thing. In the short term, a slowing economy provides favorable conditions for a price drop in the second half of the year, and in the long run, it helps restructure the economy,” he said. His comments contrast with worries among some investors that China is heading for a sharp economic slowdown, or a “hard landing”, after data showed industrial activity moderating last month. Fan said the present cycle of policy tightening might end if the economy kept slowing in coming months. “We cannot rule out the possibility of rises in interest rates and the reserve requirement ratio (RRR), but overall, the policy should be pre-emptive and it is unnecessary to wait for a significant price drop before making any move,” Fan said. Zhang Yansheng, Director of the Economic Research Institute at the National Development and Reform Commission (NDRC), said the country might shed some economic growth momentum in years ahead because of a firmer yuan and rising input costs at factories.
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