China to Maintain Steady, Robust Growth, Hu Jintao Says
China’s economy will bottom out this quarter and rebound in the following three months as government measures to stabilize a slowdown take effect, according to an academic adviser to the central bank.
“The second quarter should be the lowest point” this year, Chen Yulu said in an interview at a forum in Beijing yesterday. Full-year growth “should be able to hold up above 8 percent,” he said.
Policy makers in the world’s second-biggest economy are shoring up the nation’s expansion as Europe’s deepening debt crisis curtails exports and foreign investment, and property curbs at home damp demand for steel, cement and household goods. Government efforts to bolster growth span cuts in interest rates and bank reserve requirements, faster approval for investment projects and incentive programs to boost home-appliance sales.
The slowdown in growth has exceeded expectations, Chen said at the forum at Renmin University. Chen, who is president of the university, sits on the monetary policy committee of the People’s Bank of China.
China’s economic expansion slid to 8.1 percent in the first three months of the year from a year earlier, the fifth quarterly deceleration. Bank of America Corp. estimates the decline may deepen to 7 percent to 7.5 percent in the three months through June.
Credit Suisse Group AG has reduced China’s growth estimate for this year to 7.7 percent, which would be the slowest pace in 13 years, on weakness in exports, investment and corporate profits. Deutsche Bank AG lowered its forecast to 7.9 percent. The predictions compare with a 9.2 percent expansion last year.
China could let the yuan decline against the U.S. dollar to avoid further slowdown pressure in a scenario where the sovereign debt crisis in Europe led to a “sharp” fall in the euro, Robert Mundell, a Nobel Prize-winning economist credited as the intellectual father of the euro, said at the forum.
A drop in the euro to below $1.18 would be “a good time with the Chinese government to let its currency depreciate, go down against the dollar, because if the dollar is going up rapidly and if China goes up with it, it would bring a new kind of slowdown to China,” said Mundell, 79, a professor at Columbia University.
PBOC adviser Chen said Europe has the capacity to solve its problems. The European Union could issue euro bonds to resolve Greece’s fiscal woes and China could help out by buying some of those bonds, he said, without elaborating.
Leaders attending the Group of 20 meeting in Mexico next week should help France’s President Francois Hollande win German cooperation on the issue, he said.
If Greece left the single currency, there would be a short- term impact on the euro’s value, Chen said, adding that “the notion that the euro would depreciate in the longer term if Greece exits is too pessimistic.” The key question is whether Greece’s departure would cause a chain reaction leading to Spain, Portugal and other nations pulling out, he said.
--Zheng Lifei. With assistance from Zhang Dingmin and Nerys Avery in Beijing. Editors: Nerys Avery, Amanda Jordan
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