From Caijing Magazine:
Midway through what Premier Wen Jiabao called “the most difficult year,” China has now reached a critical point where economic planners must decide whether the tight monetary policy in place since December 2007 should be relaxed to prevent an economic downslide before 2009.
Against the backdrop of Beijing policies that tightened credit and forced banks to raise reserves, China’s economic position has worsened since last year. It’s facing weaker external demand tied to financial turmoil and economic slowdowns around the world, combined with soaring prices for energy and other inputs. Winter storms, an earthquake and floods made things worse. Industrial profits fell, the stock market turned bearish, and real estate sales slumped.
China’s gross domestic product maintained a robust 10.4 percent growth rate in the first half, while growth in the consumer price index moderated to 7.9 percent, reflecting the tighter monetary policy. Yet GDP growth has been slowing. The rate was 10.6 percent in the first quarter, 0.7 percent below the same period 2007, and 10.1 percent in the second quarter.
