China's economy is expected to grow at a moderate 9.5
per cent in 2007 amidst a slow-down in exports, domestic
consumption and investment the three main engines
of China's economy the State Information Centre
(SIC), a think tank under the National Development and
Reform Commission, has said.
China's trade surplus is expected to reach $177 billion,
up $30 billion from 2006. Gross domestic product (GDP)
grew by 10.7 per cent in the first nine months this year
Capital formation is expected to hit $1.68 trillion in
2007, up 20 per cent 6.5 percentage points lower
than its prediction for the year 2006. Exports will jump
15 per cent in 2007, 9.5 percentage points slower than
in 2006. China tightened fiscal policy two years ago in
the hope of capping the galloping fixed asset investment
and preventing possible overheating of the economy.
The government is following a tight money policy to ward
off possible overheating of the economy amidst excessive
bank loans and a surging trade surplus. The monetary policy
would also try to maintain the continuity and stability
of the macro-control policies, according to the People's
Bank of China (PBOC).
According to the SIC, capital formation is expected to
hit $1.68 trillion (13.45 trillion yuan) in 2007, up 20
per cent, but 6.5 percentage points lower than the figure
predicted for 2006.
The SIC also suggested the government institute heavier
taxes on fossil energy such as coal, oil and natural gas,
in order to improve energy efficiency.
China should follow a slightly more stringent monetary
policy in 2007, restricting newly increased loans to three
trillion yuan, said the report.
To achieve a balance in international payments, the think
tank suggested adjusting the tax system and speeding up
the standardisation of corporate income tax for domestic
and overseas-funded companies.
It said that China could use its ample foreign reserves
to buy in reserves
of strategic resources like crude oil and major metal
products when prices on the international market are low.