Will Chinese Economy Continue to be Bullish in 2010?

The economy is expected to continue topping the agenda of the annual sessions of China's top legislature and political advisory body, which will kick off this week.

The Chinese economy secured a dazzling 8.7 percent growth rate in the past year. Will the economy continue its bullish trend in 2010? And what could add to the complexity of maintaining a sustained growth?

Li Ningjing finds out more.

Reporter: Amidst the uncertainty of the global economy, the picture in China looks much more positive. The World Bank has forecasted 9 percent GDP growth for the world's third-largest economy this year, while the International Monetary Fund made a projection of 10 percent.

Some financial institutions are even more optimistic. He Jun is a senior analyst at Anbound Consulting Group.

"Judging from conditions last year, the potential of domestic consumption has been underestimated. Once appropriate stimulus policies are put into place, there will be huge demand. What's more, figures of the first two months show export is on a better-than-expected recovery. So our group forecasts 11 percent growth for the economy."

Although optimism is prevalent, Chinese Premier Wen Jiabao warned during an online chat with Internet users that 2010 would be "the most complicated year" for the nation's economy.

Economists echoed this sentiment, noting this year will be an adjustment period for the Chinese economy.

Li Daokui, a renowned scholar with Tsinghua University, explains.

"The stimulus policies in 2009 helped secure growth, but they also left some negative impacts. The adjustments of policies will unavoidably rock the economy in terms of the capital market and investment."

The economist also expresses worries that the economy will suffer fluctuations due to external factors.

"About 50 percent of raw materials come from the international market, and export contributes 30-40 percent to the nation's GDP. So undoubtedly fluctuations in the international market will have huge impacts on the Chinese economy."

To effectively contain inflation remains another challenge.

China's central bank has raised the deposit reserve requirement ratio twice since January. He Jun with Anbound says it's a signal that the government is taking measures to address the challenge.

"The inflation expectation is rising. If the external economic climate keeps improving, I think we will see an increase of interest rates in the third quarter. If the economy gets overheated, we cannot rule out the possibility of interest rates rising in the second quarter."

The analyst indicates that the consumer price index, or CPI, a main gauge for inflation, tends to keep hiking, but he predicts the inflation will be contained at a moderate level, with the average CPI below 4 percent.

For ordinary people, while most of them show confidence in the economy, they each have their own concerns.

"The housing prices are too high; I hope they go down."

"If the housing market could be stabilized, I would consider purchasing a house."

"The commodity prices rise sharply. I have to spend a lot on food and daily necessities."

All these issues will be on the table before delegates at the upcoming two meetings, as people look to them with high hopes for improving their livelihoods.

Li Ningjing, CRI news.