Beijing, Jan 18 (Agencies): UBS economists have said that China will have a moderate growth of around 9 per cent, in GDP this year as the government steps up measures to tackle excessive liquidity that threatens to raise the already high inflation and trigger overheating.

The GDP growth will fall to 9 per cent from an estimated 10 per cent in 2010, while inflation will shoot up to as much as 6 per cent in the first half of the year from the present 5.1 per cent, Wang Tao, UBS's China economist said.

The Chinese government will release economic data for 2010 on January 20, and Vice-Premier Li Keqiang said last week that China's GDP grew about 10 per cent.

Still, China's GDP growth will be more than double the global average of 3.7 per cent this year, down from a 4.1 per cent growth in 2010, Larry Hatheway, the chief economist of UBS Investment Bank said. "China's tightening measures this year won't result in a hard landing of China's economy, as feared by many investors and economists in the West. China's GDP growth is not likely to drop significantly over the next few years," Wang said.

"In fact, China's economy faces greater upside risks and overheating rather than a hard landing. To tackle excessive liquidity, which triggers inflation, and overheating in the property market, the central bank will raise the benchmark interest rate by 0.75 per cent this year and hike the reserve-requirement ratio to an 'unprecedented level'," Wang said.

The central bank raised the the reserve-requirement ratio (RRR) four times in two months, in addition to raising the interest rate twice in a year to tackle the problem of excessive liquidity and inflation.

China's economy has been seeing excessive liquidity since the government released a USD 586 billion stimulus package and adopted a "moderately loose" monetary policy in late 2008 to counter the effect of the global financial crisis.

“A target-beating new bank loan of 7.95 trillion yuan (USD 1.2 trillion) and increased capital inflows could have worsened the problem,” analysts say.
China's CPI rose to 5.1 per cent in November, a 28-month high, driven higher by food price surges.

China's M2, or broad measure of money supply that includes cash and all deposits, had reached 72.6 trillion yuan by the end of 2010, an increase of almost 20 per cent.