A Chinese government think-tank has said the country's economy will grow at an annual rate of around 8.5% in the third quarter, picking up from the second quarter's 7.9% pace.
The upbeat forecast comes against a background of anxiety in world markets that Chinese growth might falter as a boom in government spending and bank lending peters out.
The State Information Centre (SIC) said growth in bank credit would 'normalise' in the coming months but it warned that any abrupt slowdown in lending would leave many state-backed projects unfinished and result in a new crop of non-performing loans.
The SIC said China would stick to its 'proactive' fiscal policy and 'appropriately loose' monetary stance in the second half of the year.
The think-tank said China's inflation rate had been falling for many months, so there was no basis for it to alter its monetary policy. It forecast that the consumer price index (CPI) would fall 1.3% this quarter from a year earlier.
The SIC said the Chinese economy has bottomed out but is still growing below potential, mainly due to weak exports. It said exports would fall at an annual rate of 20% in the third quarter, with imports dropping 12.7%.
Capital spending would remain a key driver for the world's third-largest economy, and urban investment was likely to rise 32% in Q3, it said. Strong investment is exacerbating many deeply rooted problems, including over-capacity, the think-tank said. It listed steel and cement as sectors with serious over-capacity.
