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UPDATED: December 26, 2008 NO. 1 JAN. 1, 2009
Economic Outlook for 2009
Beijing Review interviewed 10 economists and experts to get their insights about China's economic prospects this year

Rural consumption, in the wake of shrinking exports and gloomy real estate prospects, might be the next major factor that could drive the Chinese economy in the years ahead.

(Tao Dong, Managing Director & Asia Chief Economist, Credit Suisse First Boston.)

Xia Bin: A growth rate of 8 percent is out of the question in 2009

I personally believe China can maintain steady economic growth this year

provided that the government adjusts related policies in a timely and proper manner, although the country is facing great decision-making challenges now amid the global financial turmoil. By "steady growth," I mean a growth rate a little more than 8 percent against the backdrop of the global economic downturn. An 8-percent growth rate would be happy news and is exactly the goal the Chinese Government is pursuing in the year to come.

I have six reasons to justify this. First and foremost, the Central Government, already aware of the crisis impact, has adopted a "proactive" fiscal policy and an "appropriately accommodative" monetary policy to prevent the economy from turning downward. I believe the Central Government will introduce more new policies conducive to the country's steady economic growth in a couple of months.

The second is that in 2008 China yielded a record grain harvest for the fifth year in a row, which makes it better positioned to relax monetary policy while keeping prices stable-foodstuffs have a weight of 33 percent in China's consumer price index (CPI).

The third is China's fiscal revenue could grow as much as 20 percent in 2008, although in the second half it had decreased month by month. It's much more important that China basically has no fiscal deficit. Fiscal revenue accounted for 12 percent of the country's GDP in 1998, and the rate now stands at 20 percent. That means at a crucial moment like this when the country needs more active stimulus policies, it is capable of ensuring steady economic growth by raising its fiscal deficit.

The fourth is China continues to adopt limited capital account restrictions and attracts mostly foreign direct investments, making it hard for capital to flow in or out of China. There have been signs of capital outflows recently, yet in comparatively small sums. China's banks as a whole have low credit-deposit ratios and enjoy abundant liquidity. The point is not that banks have no money, but the fact that they are reluctant to grant loans to small and medium-sized companies. China has $2 trillion worth of foreign exchange reserves in addition to rich domestic cash reserves due to the limited exposure the country's financial system has to the global market. The foreign exchange reserves can serve as a cushion against a crucial situation like the global financial crisis this time.

The fifth reason is that the International Monetary Fund forecasted that global economic growth may stand at 2.2 percent in 2008, while developed countries could witness zero growth or negative growth, giving rise to anticipations that global energy prices and commodity prices may further decrease. Overseas forecasts said China's CPI growth could stand at 1.8 percent or less than 2 percent in 2008 in line with forecasts by domestic experts. When the inflationary pressure eases, the government will have more room for maneuvering to prevent prices from soaring and further adjust prices while relaxing monetary policies to boost growth.

The last reason is that China, with a population of 1.3 billion and a development gap between its eastern coastal regions and western regions, is undergoing a process of urbanization and industrialization. This has created great demand for consumer goods.

If facilitated by timely policy adjustments, the Chinese economy will still have the cash and demand for steady economic growth, and a growth rate of a little more than 8 percent is out of question in 2009. However, it will take time for these policies to take effect. I believe the effects of these policies will not be so obvious until the second half of 2009 when all macroeconomic indicators in China point to a recovery.

(Xia Bin is Director of the Finance Research Institute, Development Research Center of the State Council.)

Zhuang Jian: China's economy will encounter a soft landing

It is believed that China's export-dependent economy will encounter a soft landing in 2009 despite having become the latest victim of the downturn in global demand. The country's 2009 GDP growth may come in at around 8 percent, a bright spot in the gloomy outlook for the world economy. Currently, the combined spending plans of the central and local governments have amounted to a dizzying 20 trillion yuan ($2.92 trillion). Even if only half of those plans materialize, they will undoubtedly give a lift to the economy, which is becoming anemic. But the stimulus effect won't be felt until the latter half of this year.

The export sector may defy any rebate hikes to become even worse with its growth rate possibly heading into negative territory. There actually is not so much that we can do to reverse the loss-making streak of exporters whose orders from the West are declining to a trickle. If the developed economies stumble into a deeper recession over the next few years, exports will also suffer in tandem.

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