China yesterday bullishly predicted strong economic growth for the first half of the year fuelled by soaring exports and investment, coupled with huge state spending, but economists warned the euphoria might not last.
Year-on-year growth to the end of June will be 7.5 percent, well up on the 7 percent minimum target set for this year, according to official research body the State Information Center cited by the state Xinhua news agency.
The State Planning Commission, China's top economic planning body, was even more confident, telling the China Securities Journal that the rate would reach 7.8 percent.
If this is reflected in the official growth rate -- released Monday morning -- it will be a major achievement in what many had predicted would be a tricky year for Asia's second-biggest economy.
As 2002 loomed, analysts gloomily forecast that with growth and foreign investment tailing off and economic restructuring starting to bite, expansion could dip below 7.0 percent for the first time in 11 years.
Instead, Xinhua gleefully reported, growth was on track, crediting strong exports -- up 14.1 percent year-on-year in the first half -- and consumption, as well as continued massive government investment.
Analysts agreed growth seemed strong. "I think fixed-asset investment has been helping to drive the economy in the first half of the year, along with exports and foreign direct investment," said Robert Subarraman, north Asia analyst at Lehman Brothers in Tokyo. However he added there were concerns at the reliance on deficit-busting public spending and external factors such as foreign investment.
"I don't think you can prop up an economy indefinitely. In the end, you need a more broad-based expansion" including strong consumption and domestic demand, he said.
* Year-on-year growth to the end of June will be 7.5 percent, according to the State Information Center.
* The State Planning Commission, China's top economic planning body, is even more confident, saying the rate would reach 7.8 percent.
* For the past 11 years, GDP growth has exceeded 7 percent annually in China.
"The trick, what is needed, is to drive through more structural reforms," he added, saying China's embattled banking sector and inefficient state-owned firms still needed to be tackled.
Chen Xingdong, an analyst at BNP Peregrine Securities in Beijing, said first-half growth -- which he said should exceed 7.5 percent -- had been boosted by huge government investment and external factors, meaning it might not last.
"I believe the growth rate will slow down in the second half of the year. They will not be able to sustain the level of fixed-asset investment and exports," he said.
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