NDRC official rules out China hard landing, warns of US loose policy

China is not at risk of a hard landing in spite of an economic slowdown, said a senior official at the country’s top economic planner, warning that the loose monetary policy by the United States will fuel global inflation.

China’s economy is generally healthy although economic growth has moderated, said Zhang Xiaoqiang, vice chairman of the National Development and Reform Commission (NDRC) on Thursday.

It is not likely that China’s economy will see a drastic decline in growth and experience a hard landing, he said, adding that the economy is heading toward expectations under the government’s macroeconomic policies.

China’s economy expanded at 9.6 percent year-on-year in the first half of this year, with the second quarter recording a 9.5-percent rise, down from 9.7 percent in the first quarter. Earlier this year, the government planned 8-percent growth for the year.

The world’s second largest economy has been battling stubbornly high inflation, which escalated to a 37-month high of 6.5 percent year-on-year in July in spite of hikes in interest rates three times and reserve requirement ratio for banks six times by the central bank.

Government officials and economists believe inflation was near its peak in July and will ease for the rest of the year.

However, China will face mounting imported inflation due to a continuous depreciation of the US dollar in the medium term, he said.

The US policy of continuing a loose monetary policy to boost its economy will exacerbate global inflation, he said, adding that it will also hurt the purchasing power of China’s foreign exchange reserves.

The spreading debt crisis in the US and Europe will have a large impact on the global economy and thus dampen China’s exports, he said.

He said it is still too early to tell whether the global economy will retreat to a double-dip recession, but the global economy is, for sure, very fragile and will post a low growth rate this year.

He added that protectionism by some developed nations is likely on the rise and will dent the global economy.

Earlier this week, Premier Wen Jiabao called for nations to work together to stabilize turbulent financial markets. He also urged relevant countries to take concrete and responsible fiscal and monetary policies to trim fiscal deficits and resolve debt problems to restore global investors’ confidence.

Xinhua

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