China: Moderating in 2007
After growing very rapidly in the first half of the year, GDP slowed somewhat in the second half as fiscal and monetary policy exerted a dampening impact on activity. Nevertheless, growth in 2006 may still be around 10.5%. The moderate slowing is projected to continue in the first half of 2007 as export growth slackens and the impact of policy tightening is felt, but thereafter growth may pick up again, resulting in the economy growing in line with potential of somewhat more than 10% by 2008. Despite imports accelerating and exports slackening, the current account surplus is projected to rise continuously, reaching $285 billion (8.8% of GDP) by 2008. As supply increases in line with demand, inflation will remain subdued at 2% during the projection period.
A combination of further exchange rate appreciation and some relaxation of fiscal policy would help to shift demand from net foreign trade to domestic demand and reduce the external surplus. Tax reforms, such as unifying the corporate tax rate for domestic and foreign companies at a low level and reducing taxation of investment would make the tax system less distorting and help to sustain growth over the longer term.
|Population (000s), 2005||1 307 560|
|Area (000 sq km)||9 597|
|GDP (Billion USD), 2005||2 234|
|Life expectancy at birth (Women, Men), 2004 ||73.0, 70.0|
|Total labour force (000s), 2005||778 770|
|Government type||Communist state|
|Indicators||% change unless otherwise indicated|
|Real GDP growth||10.6||10.3||10.7|
|Consumer price index ||1.4||1.0||1.1|
(% of GDP)
|Current account balance (% GDP)||8.3||8.5||8.8|
No. 258/259, December 2006