China on track to post 8 percent growth

By staff and wire reports

SHANGHAI, China -- China is on track to post growth this year that approaches last year's levels, according to a senior official.

China's bid to join the World Trade Organization is nearing its end game. But China's economy has yet to tie into worldwide growth patterns. That's a good thing in 2001, as its major trading partners see a slump.

Qiu Xiaohua, deputy director of the State Statistics Bureau, estimates gross domestic product for 2001 will post growth of 7 percent to 8 percent, local media reported.

"Even allowing for the worst case scenario, such as a hard landing for the U.S. economy and continued gloom over the global economy, China's economy is fully guaranteed to grow 7 to 8 percent this year," Qiu said.

Marching to different drum

That means China remains the fastest-growing economy in Asia with figures expected to come close to last year's 8.0 percent growth rate.

"Because of the domestic economy, it [China] remains quite resilient," said Charles Cheung, head of China research for Salomon Smith Barney.

Salomon Smith Barney is maintaining a similar forecast to Qiu, though a prolonged downdraft in Japan and the United States could cause a revision.

Exports still only account for a fifth of China's economy, Cheung added. That's a very low figure for Asia, where it's not uncommon for a country to send more than half its goods overseas.

So the likelihood that China's two biggest trading partners are in recession has had little effect. Consumption growth is still strong in China, where a middle class is rapidly emerging.

Earnings in China have remained firm, with government policies and overseas investment both increasingly favorable to industry.

Red flags raised

China's prospects are also brightened by massive government spending on infrastructure. Economists see plenty of scope for further growth, by encouraging home ownership, or developing impoverished inland China.

Qiu insists that despite the government spending, which kicked off in 1998 after the Asian economic crisis, "there is no danger of inflation in general." The biggest concern, he says, is preventing deflation.

Growth in the second half is likely to be slightly lower than in the first half, which showed 8.1 percent growth, as exports falter, Qiu added.

He hoisted several other red warning flags, including a lower-than-expected increase in farmers' incomes and rising unemployment.

Reuters contributed to this report.