BEIJING, Aug. 11 -- China's gross domestic product (GDP) is expected to grow 11.4 percent in the third quarter of this year, the National Development and Reform Commission (NDRC) predicted in a research report, according to The Economic Daily.

    However, the growth rate doesn't mean economic overheating as the country's potential economic growth rate has risen to 11-12 percent from its previous 9-10 percent, said the State Information Center, under the NDRC, in the report.

    The consumer price index (CPI) growth so far is obviously structural and therefore will not trigger overall inflation, according to the report.

    According to the predictions, economic growth in the third quarter will be close to that of the first half but slightly slower than the 11.9 percent growth during the second quarter.
A series of factors are believed to be responsible for the expected slowdown.

    First, local governments are curbing the development of highly polluting and highly energy-consuming industries.

    Second, the tightening monetary policies including the interest rate and bank reserve ratio hikes are expected to reduce liquidity and slow down the economy.

    Third, trade policies like the export tax rebate cut and curbs on the processing trade beginning in the second half, are projected to put the brakes on skyrocketing exports.

    Export growth in the third quarter is estimated to be slower than in the first half of the year and the contribution of exports to overall economic growth is expected to dwindle at the same time, the report noted.

    It is predicted that investments in fixed assets will continue to see rapid development in the third quarter, boosted by demand from increasing urbanization, industrialization, and entry into the international market.

    Fixed asset investment is expected to climb faster than in the first half, by 26 percent in the third quarter with investment in urban areas projected to increase by 26.8 percent.

    About 49.8 percent of entrepreneurs from 19,500 businesses surveyed by the National Bureau of Statistics are optimistic about their business performance, suggesting strongly expanded investment in the future.

    While the government restricts the demands from investment and exports, it has been encouraging consumer demand to boost economic growth. Rising income of residents in urban and rural areas will also increase their purchasing power.

    The above-mentioned factors, together with other aspects, are expected to boost retail sales by 15.6 percent in the third quarter, 0.2 percentage points higher than the first half.

    The first three quarters are expected to see retail sales grow 15.5 percent, the fastest growth since 1997.

    China's trade surplus increased substantially in the first half, partly due to the fact that many exporters rushed to ship their goods overseas before the country's tax rebate cuts became effective.

    This will not happen in the third quarter, so growth of exports and a favorable trade balance will slow, said experts from the State Information Center, a government think tank.

    While exports are predicted to grow 26.2 percent in the third quarter, 0.9 percentage point lower than in the first half, imports are expected to climb at a rate 0.5 percentage points higher than in the second quarter, bringing 77.1 billion U.S. dollars in trade surplus.

    Trade surplus in the first three quarters is estimated at 189.6 billion dollars, an increase of 72.7 percent or 79.7 billion dollars over the same period last year.

    The CPI, a major gauge of inflation, may rise 4.3 percent in the third quarter from 3.2 percent in the first six months and 4.4 percent in June alone, the NDRC report pointed out.

    Strained supply of foods including pork and corn is expected to continue pushing up commodity prices in the third quarter, experts noted.

    In the second half of the year, the NDRC will quicken the reform of pricing mechanisms for resources like water, electricity, oil and gas, and as a result the prices of these products will rise. This will also push up the ex-factory prices of industrial products and the CPI, the experts said.

    (Source: China Daily)