Economy may grow 10.2% in Q3

CHINA’S economy may expand 10.2 percent in the third quarter, slightly higher than the 10.1 percent increase in the second quarter, the State Information Center predicted today.

The Consumer Price Index, the main gauge of inflation, may rise 6.6 percent through September, down 1.3 percentage points from the figure in the first half, said the research unit under the National Development and Reform Commission, the nation’s top planner.

“China’s economy will grow in a stable manner in the third quarter and the pace of price increases will slow down,” said analysts with the center in a report.

However, production costs will mount in the following months and add more pressure on companies, especially small- and medium-sized enterprises.

In June, the Producer Price Index, the factory-gate inflation gauge, rose to a 12-year high of 8.8 percent.

The center suggested the government provide more tax breaks for companies and encourage them to introduce more technology to digest the pressure brought by cost increases.

“The government should expand corporate subsidies and charge less in administrative fees to help companies weather the challenge,” said the report.

For example, the toll fee can be reduced to mitigate transport expenditures. To those pioneers in innovation or using new equipment to cut costs, the government can consider more tax breaks for them, it said.

In the first half, China’s fiscal reserves amounted to 1.19 trillion yuan (US$173.4 billion), making it possible for the government to adjust tax policies to bolster economic growth.

Meanwhile, China should make more efforts to increase supply and prevent price increases from growing into a deeply entrenched one, instead of mainly food-driven.

China should also choose “good timing” to raise prices of energy-related products and adopt economic measures to guarantee the production of daily necessities and those needed for the reconstruction in earthquake-hit areas.

Source: Shanghai Daily

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