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China's growth surging, says expert
CLANCY YEATES
November 23, 2009 .
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AN ADVISER to the Chinese government has predicted economic growth will rise further next year, lending support to the prospect of a "V-shaped" recovery for Australia's biggest trading partner.

Professor Ba Shusong, deputy director-general of the State Council Development Research Centre, is visiting Australia for a conference on China's outlook and said the government's massive stimulus package would push growth past this year's rate of about 8 per cent.

"In 2010 we can look to 9 per cent, that is to say, going back to the normal rate."

Faster growth in China is likely to fuel the Australian economy through higher demand and prices for commodity exports, especially coal and iron ore. But financial markets are also looking increasingly to China to drive a recovery in global growth as most developed countries are likely to remain in the doldrums for months.

Professor Ba said the Government's 4000 billion yuan stimulus would account for a bigger share of investment, fuelling expansion by ''stimulating market demand''.

Most analysts agree that the stimulus will boost China's economy next year, but some are saying state-controlled investment is not enough for long-term growth driven by private spending.

Macquarie Bank's chief economist, Richard Gibbs, said China's next challenge was to upgrade "social infrastructure", as opposed to bridges and buildings. Poor social services had led some households to save almost 30 per cent of their disposable incomes, for example, which limits the capacity to spend on goods and services.

Some economists are also concerned by the rapid growth of credit in China and the risk of more poor-quality loans. Professor Ba even warned that housing bubbles were possible in some cities.

Despite such hurdles, Mr Gibbs said China's role would only grow as a result of the financial crisis, especially as the US economy and financial system were reeling.

"What that is doing is accelerating the rise of the emerging economies into a more dominant position," he said. "I don't think we will see the US reclaim the mantle of the leading economy in a structural sense."