China’s GDP to grow nine percent in 2011

Beijing, Oct 21, 2010 (Calcutta Tube) China’s GDP will grow by nine percent next year although rising labour costs will hit the economy, a media report said Sunday.

Liu Shijin, deputy director of the Development Research Centre of the State Council, made the forecast at a forum organised by the Bank of Communications, China Daily reported.

Liu forecast 10-percent growth in 2010 due to the economic slowdown in the second half of the year in China.

China’s exports and investments will be better in 2011, but the growth rate of consumption will pull back slightly from this year’s boom, making nine percent growth ‘very likely’, he said.

However, China still faces three major challenges in the long-term, Liu said.

‘The first challenge comes from the rapid rise of labour costs,’ he said at the OTO Fortune Forum.

‘The competitiveness of Chinese companies will be threatened by rising labour costs unless they find a new source of growth, such as innovation.’

The second challenge is from liquidity as China’s currency, the renminbi, and other non-US dollar currencies are under forced appreciation pressure as the Federal Reserve is considering a new round of quantitative easing of the monetary policy, he said.

The third major challenge is whether China can maintain its quick economic expansion in the future, Liu said.

According to Liu’s forecast, in the next three to five years China’s GDP will grow by about seven percent.

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