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The relatively softer outlook for the US economy in the coming months is a drag on China's growth, especially export, while a weaker US dollar and further delay of US rate hikes are pluses, an economist said Friday.
A less strong rebound of the U.S. economy is also likely to drag China's growth, especially its export sector. But the weakening U.S. dollar should improve the competitiveness of Chinese exports and should hasten the end of deflation, said Yiping Huang, senior economist of Salomon Smith Barney, one of theworld's leading investment bank.
With the expected further strengthening of export and an end todeflation, the growth of private sector investment should take off,Huang said, adding that investment and retail sales data further confirm the trend of growth acceleration but sustainability of domestic demand is now dependent on a pick-up in private sector investment.
Data on investment and consumer spending released recently continued to confirm the trend of growth acceleration, he said. Growth of retail sales was up to 9.3 percent in May compared to 8.2 percent in April. Deflation eased somewhat to 1.1 percent in Mayfrom 1.3 percent.
"We still expect deflation to end around the end of the year with faster monetary growth and the expected weakening of the U.S.dollar. State sector fixed asset investment was up 24 percent in May, led-by real estate investment," Huang added.
The economist forecast the strength in investment during the coming 6 months depends on a pick-up in private sector investment."If we look at financial institutions' loan growth, it appears to have just bottomed out but is still at around historically low levels since 1998," he said.
(Xinhua News Agency June 22, 2002)
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