China might see a "significant dent" in its economic growth
rate, if the US economy slides into a recession,?according to
a?United Nations report released on Wednesday.
China is expected to grow at a robust pace of 10 percent in
2008, moderating from the 11.4 percent growth estimated for 2007,
stated the report entitled World Economic Situation and
Prospects 2008.
The annual report also considered a more pessimistic scenario
under which housing prices in the United States dive significantly
and push the US economy into a recession in 2008. Should this
happen, economic growth in China would drop below 8 percent in
2008.
In the baseline forecast, the UN's prospects for the Chinese
economy in 2008 remained positive overall. Fixed investment
continues to be a key growth driver. Private consumption, which was
relatively weak in the past compared with other components of GDP,
will strengthen due to a strong growth in wages and the positive
wealth effects from the significant rise in stock prices over the
past two years.
The UN report said that the weight of the Chinese economy in the
world has been steadily increasing. China contributed about 17
percent to global growth in 2007, about the same as the United
States.
China's trade with the rest of the world has been growing three
times as fast as the world average since its accession to the WTO
in 2001. If it keeps up the momentum, China will become the largest
exporting economy in 2009.
China's rapid industrialization has generated strong spill over
effects on the economic development of other developing countries,
contributing directly to their exceptionally strong growth
performance in recent years.
China's increased demand for raw materials has sustained the
upward trend in primary commodity prices, which determine an
important part of export revenues of many developing countries. For
instance, China's import demand for iron ore increased by more than
40 percent, copper by more than 100 percent and edible vegetable
oils by about 80 percent during 2007.
China has also stepped up its efforts to strengthen South-South
economic cooperation through trade agreements, increased direct
foreign investment, and development assistance and debt relief, in
particular with the least developed countries. For example, China
has disbursed preferential loans?amounting to multi-billions
of US dollars in order?to encourage Chinese enterprises to
invest in ASEAN countries, and created a multi-billion dollar
China-Africa Development Fund to stimulate Chinese investment in
Africa, the report said.
China also canceled US$1.47 billion of African debt and promised
to double its assistance to Africa in 2009. China's aid is targeted
mainly at energy, telecommunications and transportation, which have
by and large been neglected by traditional OECD (Organization for
Economic Cooperation and Development) country donors.
The report, however, also pointed out that China's financial
support is highly concentrated in a small number of oil-and-
mineral-exporting countries, and most of the aid is provided in
kind by Chinese companies, using inputs of Chinese origin,
including labor.
China's RMB appreciated by more than 6 percent against the US
dollar during 2007, but China's surplus in its current account
surged further, to about 300 billion dollars. With a surplus in
both its current account and capital account, China has accumulated
more than 1.4 trillion dollars in official foreign reserves.
The UN report said China's large current account surplus should
be seen in the broader context of the problem of the global
macroeconomic imbalances involving the huge external deficit of the
US counterbalanced by surpluses elsewhere, including China. These
imbalances can not be resolved unilaterally or bilaterally.
The report urged more efforts to advance the ongoing
multilateral consultations sponsored by the International Monetary
Fund, which involve China, the Euro area, Japan, Saudi Arabia and
the United States. The consultations are focused on narrowing
global current-account imbalances while maintaining robust
growth.
Under this framework, along with more active policies in other
major surplus and deficit economies, China could make a great
contribution toward rebalancing the global economy through policies
to create broader-based domestic demand, particularly in the areas
of expanding social security, improving health and education
services, and strengthening rural income, the United Nations stated
in the report.
The annual report is a joint product of UN Department of
Economic and Social Affairs, UN Conference on Trade and Development
and the five UN regional commissions. It provides an overview of
recent global economic performance and short-term prospects for the
world economy and of some key global economic policy and
development issues.
(Xinhua News Agency January 10, 2008)
