Economy
GDP growth target too low: PBOC adviser
By Li Xiang (China Daily)
Updated: 2011-05-17 09:40
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Consumers line up outside a Gucci store in Sanya, Hainan province, after a duty-free shopping policy took effect in the island province in April. China's economy could grow by 9 percent on average in the next five years, a central bank adviser said on May 16, 2011.?[Photo/China Daily] |
PBOC adviser says inflation will be around 5 percent this year
BEIJING - The Chinese economy is likely to expand by 9 percent on average in the coming five years, according to the central bank adviser Li Daokui on Monday.
Li warned that the government's growth target of 7 percent is "way too low" to satisfy the investment hunger in the country's less-developed regions and to create enough jobs.
"The Chinese economy still has great potential to grow very rapidly," Li told the CLSA China Forum in Beijing.
"The 7 percent target is not enough to satisfy the investment hunger of the inland areas and to create enough jobs for 6.8 million new college graduates every year."
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"It has been estimated that for every 1 percent increase in our urbanization ratio, there will be 1.5 or 2 percent GDP growth," he said.
Li also said policymakers should continue to raise interest rates to curb high inflation and to eliminate negative real interest rates, a situation that occurs when inflation is higher than interest rates.
"We have to prepare for relatively high inflation in the coming decade and that's why monetary policy has to be relatively tight," he said.
Li predicted that inflation will be kept below 5 percent this year, a level slightly higher than the government's 4 percent target. China has raised the reserve requirement ratio for banks eight times and interest rates four times since last October to tame the country's stubbornly high inflation.
While adopting a tight monetary policy to guard against asset bubbles, the government should be very cautious in managing capital inflows, especially speculative money lured by higher interest rates, he said.
Li also urged the government to adopt a relatively loose and aggressive fiscal policy to increase public expenditure and to improve social welfare in order to ease mounting social tension.
In the meantime, Li forecast that China's trade surplus will drop to about $100 billion, accounting for 1.5 percent of GDP, which will help ease the pressure for yuan appreciation.
"The political pressure on forcing the renminbi to appreciate will come down and should come down," he said.
China had a trade surplus of $11.4 billion in April as exports soared while commodity imports eased.
The nation posted an unexpected trade deficit in the first quarter.
Vice-Minister of Finance Zhu Guangyao said earlier that China will still likely achieve balanced trade with a modest surplus this year.
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