China 2010 GDP to cross 37 trillion yuan; economy expected to grow 10%

BEIJING: China’s gross domestic product will exceed 37 trillion yuan in 2010, a top government think tank predicted, as Beijing looks to overtake Japan as the world’s second-largest economy for the full year.

The figure, given by the Chinese Academy of Social Sciences, is equivalent to $5.4354 trillion, based on calculations using the average yuan/dollar rate in the first nine months given by the central bank.

The Chinese economy is expected to grow by around 10% this year from the year before and per capita GDP may reach $4,000, CASS said in its annual Blue Book of China’s Society launched on Wednesday.

China eclipsed Japan in the second quarter, as the archipelago nation was hit by cooling exports and flat domestic consumption in the April-June period.

Japan said earlier this month that it remained ahead for the first nine months, thanks to strong growth in the first quarter. But since then it has been outperformed by China, a trend that is expected to continue.

China eyes market-driven rates - c.banker

BEIJING: China wants to give the market more sway over its interest rates in the next five years, the central bank chief said on Friday, a crucial step towards the deregulation of the Chinese financial system.

The government protects banks from competition against each other by guaranteeing them a hefty spread between lending and deposit rates, but has vowed to relax its controls to ease distortions in the economy.

China’s ambition to become a global financial centre is also pushing the government to move ahead with reforms, as it seeks to turn its banks into modern firms that can do battle on the same playing field as their global peers.

“There may be some noticeable progress in marketising interest rates in the period of the 12th Five-Year Plan,” Zhou Xiaochuan said, referring to ruling Communist Party’s policy blueprint for 2011-15.

Zhou, who heads the People’s Bank of China, said monetary policy could be improved if interest rates were allowed to move more flexibly.

“Macroeconomic policies, including monetary policy, should have a smooth and effective mechanism that can be transmitted to market prices,” Zhou told a financial forum in Beijing.

He said that big Chinese banks that are more competitive would be first in line for the gradual freeing up of rates. Policy banks, such as China Development Bank , whose mandate is to lend in line with government objectives, have weaker commercial discipline and so would still be protected, he said.

China currently sets a ceiling on deposit rates and a floor on lending rates, with a roughly 3 percentage point gap between them, a spread that is the source of a large chunk of bank revenues.

It has long pledged to move to a more market-based system for setting rates in order to foster competition between banks.

Zhou said Chinese banks had grown too dependent on profits from the rates market and said banks should cut their reliance on interest-rate related businesses.

“Commercial banks should gradually reduce the proportion of revenues generated from rate-related businesses,” he said.

In separate comments reported on Friday, Zhou noted the central bank’s problems in trying to satisfy all of the competing interests in the booming Chinese economy, now the world’s second biggest.

Zhou said the central bank had a tough task in managing the yuan, the international poster child of the tightly controlled Chinese market, because it cannot please importers and exporters at the same time.

The yuan’s value is a lightning rod with the US lawmakers as they believe China deliberately suppresses it to help Chinese exporters sell their wares more cheaply abroad.