Nation's GDP to expand 8-9% in 2006
(Reuters)
Updated: 2005-12-22 20:02

China's gross domestic product growth is likely to slow next year to between 8 percent and 9 percent, Yao Jingyuan, chief economist at the National Bureau of Statistics, said on Thursday.

Officials expect GDP growth this year to come in just below the 9.5 percent clip recorded in 2004 and 2003.

Yao told an economics forum that urban and rural consumption would be an increasingly important driver of growth in 2006 as the government focused on raising incomes of low-wage earners, but that investment was likely to remain the main engine.

Yao said China's needs as a developing country would make it very difficult to reduce annual growth in fixed asset investment to below 20 percent.

Fixed investment for all of 2005 was likely to increase by between 25 percent and 26 percent, Yao said. He did not specify which measure of investment he was referring to.

Urban fixed investment in the first 11 months rose 27.8 percent on the year. Total fixed investment, a broader category measured quarterly, grew 26.1 percent in the first nine months.

Yao said China's expanding trade surplus -- set to reach $100 billion this year, more than triple last year's $32 billion -- would generate pressure for the yuan to rise and could lead to increased friction with the country's trading partners.

Given this week's GDP revision showing the economy is 16.8 percent bigger than previously thought, it would be reasonable for the government to revise up its $2,500 target for per capita gross domestic product by 2020, Yao said.

Per capita income in 2004 was already $1,486, instead of $1,272 before the revision.

Yao offered no new target but said policy makers would aim to keep GDP growing between 8 percent and 10 percent a year in future.

Services accounted for 93 percent of the increase in estimated output. Because prices of services are rising faster than goods prices, some economists have said the statistics bureau might have to revise up its estimates of inflation.

But Yao played down such concerns, noting that the government regulated the prices of a host of services such as water, power and gas.