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China's growth may shrink to 5.5%

By Wang Xu (China Daily)
Updated: 2009-02-21 10:46

China's economic growth may sink to 5.5 percent in 2009 and won't be able to benefit from the recovery of the US economy, Stephen Roach, Morgan Stanley's Asia chairman said.

"Given the weak end of last year and weak beginning of 2009, the growth rate is likely to be no higher than 5.5 percent," Roach said.

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China's GDP growth dropped to a seven-year low of 6.8 percent in the fourth quarter of 2008, as shrinking overseas demand dealt a heavy blow to its export industry and dented investment in the sector.

Roach reckoned the global growth rate is likely to rebound to 2.5 to 3 percent in 2010, as the stimulus packages introduced around the world would boost the economy. But there is a great chance that world GDP growth could weaken in 2011, bringing the average annual growth between 2009 to 2011 to 2 percent.

However, Roach warned that "China is going to be disappointed", if the nation expected to benefit from a recovery in the US, as the crisis would change US consumers spending habit where they would spend less and save more.

Consumption accounted for 72 percent of America's real GDP in 2007, a record for the nation and any major economy in modern history. The shopping binge in the US helped bolster an export boom in China, which saw the share of exports as a part of the nation's GDP expanded from 20 percent in 2001 to 36 percent in 2007.

Roach said the current crisis is a wake-up call for China to adjust its development model and end its export-driven growth.

"China needs to be bold and aggressive in framing pro-consumption policies," Roach said.