China's Growth to Remain at Robust 9.2% in 2012

Despite central government measures to relieve inflationary pressures, China’s economy will grow a robust 9.2 percent in 2012, forecast Beijing’s Renmin University Saturday. That’s only a slight drop from the 9.4% growth projected for 2011.

The most encouraging aspect of the report was the forecast that China’s inflation — as measured by year-on-year CPI growth — will fall to 3.3% next year from the high of 6.5% in July and 5.5% in October, the slowest rate since May.

China’s gross domestic product (GDP) slowed to 9.1% in the third quarter from 9.5% in the second quarter and 9.7% in the first quarter due to the effect of the central government’s monetary tightening which included three interest-rate hikes and six bank reserve ratio hikes in 2011.

To ensure that the economy doesn’t slow down more, the government has announced its readiness to continue fine-turning monetary policy as the inflation rate continues its decline.

However, the report cautioned that a bigger growth slowdown in the real economy could create a rising risk the shifting of more resources to speculative paper investments which could produce more structural problems.

China’s ability to maintain strong growth is crucial in efforts to keep the global economy from slipping into another financial crisis, especially given the stresses produced by the EU’s ongoing debt crisis.