China’s growth may top 11% this year

China’s growth may top 11% this year

Beijing: China’s economy, the world’s third biggest, may expand at a faster pace in 2010 even as officials cool lending to restrain inflation and avert asset bubbles.

Goldman Sachs maintained its forecast for 11.4% growth after the Chinese central bank raised cash reserve ratio (CRR) requirements for lenders on 12 February. That compares with an 8.7% expansion last year. The reserve ratio is the portion of deposits banks must keep with the central bank.

Declines in stocks and commodities because of the CRR hike highlighted concern that monetary tightening in China may trigger a slowdown that undermines the global recovery. Rebounding exports, up for a second month in January, may boost a Chinese economy that last year depended on its own stimulus-fuelled investment and consumption for growth.

“The Chinese economy is in good shape and exports will be the biggest swing factor this year," said Lu Ting, a Hong Kong-based economist for Bank of America-Merrill Lynch. “Outside of China, people underestimate the government’s ability to manage the economy and the stimulus exit." Merrill forecasts 10.1% growth and Capital Economics Ltd sees a 10% gain, estimates unchanged from before the reserve-ratio announcement effective 25 February.

Simon Kennedy, Svenja O’Donnell and Kartik Goyal contributed to this story.