China's economy is forecast to grow by more than 9 per cent during the first quarter of 2003.
The growth rate, predicted by the Macroeconomics Research Institute, an affiliate of the new State Development and Reform Commission, would result in the highest quarterly gross domestic product (GDP) since 1997.
"China's economic performance has continued to improve since the first quarter of last year," according to a team report from the institute.
Renowned economist Hu Angang with Tsinghua University has predicted an even higher growth rate of 10 per cent for the quarter.
But the institute team expects that the growth in the country's GDP will exceed 8 per cent for the first half of this year, with the annual rate estimated at 8 per cent.
The predictions are much higher than the target rate of 7 per cent, set by the central government at the annual session of the National People's Congress in March.
Despite the high growth rate, experts have dispelled fears of an overheated Chinese economy.
In the current climate, China's annual economic growth rate should be targetted at between 7 and 9 per cent. If the GDP growth rate is lower than 7 per cent, the country cannot provide enough job opportunities and will face problems of deflation; if the rate is higher than 9 per cent, it increases financial and inflation risks.
"The rate of the previous quarter is forecast to be higher than 9 per cent but it doesn't mean the annual rate will be higher than 9 per cent," the team said in the report.
It expected exports and domestic investment to decrease in the coming months due to global economic uncertainties created by the Iraq war and macroeconomic control measures to be implemented by the government.
But Hu said China has entered a new phase of economic expansion, which started at the beginning of last year.
He said the major economic indicators, including industrial output, infrastructure investment and foreign investment inflow, have shown the momentum is continuing.
Total industrial output amounted to 834.3 billion yuan (US$100.5 billion) in the first three months of 2003, achieving a year-on-year increase of 17.2 per cent, the National Bureau of Statistics said last week.
Six major industries including telecommunications, computers, electronics and transportation equipment fuelled the fast rise in industrial output, the bureau said. During the January-March period, output of electronics equipment and telecommunication products such as computers and mobile telephones rose more than 40 per cent on a year earlier.
During the period, industrial exports reached 514.6 billion yuan (US$62 billion), a year-on-year increase of 30.2 per cent.
Industrial output is an important indicator of China's economic development as it contributes about 60 per cent to gross domestic product.
But some economists said investment and output is overheated in several sectors, even though the overall Chinese economy is sound.
Lin Yueqin, researcher with the Institute of Economics under the Chinese Academy of Social Sciences, expressed his concerns over the massive investment in real estate, car production and infrastructure.
For example, car production rose a year-on-year 120 per cent to 399,000, while output of all types of vehicles rose 54 per cent to 1.05 million.
Lin is also worried about the rapid increase in bank loans to support infrastructure development during the quarter.
"But in order to promote domestic consumption and increase farmers' income, we should maintain a relatively rapid growth rate in the coming years," said Lin.
Lin's view was supported by the International Monetary Fund (IMF) recently, who confirmed its view that China will continue to grow strongly in the coming years.
At a press conference at the IMF headquarters, IMF chief economist Kenneth Rogoff said China is growing very strongly and he expected China to achieve an annual growth rate of 7.5 per cent in both 2003 and 2004.
But from the perspective of the global economy, Rogoff also said China is still relatively small in terms of world trade.
(China Daily FU JING 04/16/2003)
