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China may overheat with 16% growth, say government researchers

BEIJING: China’s economy may grow as much as 16% this year with accelerating inflation and the risk of a property bubble unless the government reduces stimulus measures, government researchers said on Jan 11.

“If the government continues with the same strength of macro-economic stimulus as in 2009, there will be notable economic overheating in 2010,” Yao Zhizhong and He Fan, economists with the Chinese Academy of Social Sciences, said in an article published in the official China Securities Journal. Local media reported on Jan 11 that new lending surged last week.

A stronger-than-estimated trade rebound in December may give policy makers more room to pare stimulus measures after record lending in 2009. The central bank last week guided three- month bill yields higher for the first time since August and may lift the benchmark one-year lending rate to 5.85% by year-end from 5.31%, economists forecast.

China’s exports grew 17.7% last month from a year earlier, the first increase in more than a year, and imports rose to a record, customs data showed on Jan 10. Gains were boosted by a low base for comparison in 2008.

“The export rebound will add significant momentum to China’s growth, contributing about 7.5 percentage points to growth in gross domestic product,” Yao and He said.

China’s banks lent 600 billion yuan (RM293.5 billion) in the first working week of January because of pent-up demand from the end of 2009, Economic Information Daily, a newspaper affiliated to the state-run Xinhua News Agency, reported on its website on Jan 11 without citing a source.

Banks loaned about 100 billion yuan a day last week, the official China Securities Journal reported separately today. The publication said Ba Shusong, deputy head of the finance institute under the State Council Development and Research Center, gave the number at a conference. Ba didn’t specify the source of his information.

That would compare with 294.8 billion yuan for all of November. December data may be released this week. Chinese lending is usually biggest at the start of each year.

The economy will expand 11.6% this year with “moderate” stimulus, Yao and He said. A complete withdrawal of measures to aid growth would see a dip to 7.7%, they said. The world’s third-biggest economy expanded 8.5% last year, according to the median forecast in a Bloomberg News survey of economists. – Bloomberg LP
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