BEIJING - China is on course to hit its 8.0 percent growth target this year and become the first major economy to pull decisively out of the global slump, according to a Reuters poll.

The survey of 20 economists, conducted last week, suggests the momentum generated by massive fiscal and monetary stimulus will carry over into 2010 and lift the rate of gross domestic product growth to 8.8 percent.

The forecasts are 0.2 and 0.3 percentage points higher than the median results of the previous survey in March, reflecting Beijing's increasing determination to use all the policy levers at its disposal to make up for a collapse in exports.

This recovery is sustainable until the end of next year at least, said Mingchun Sun, an economist with Nomura in Hong Kong who has long been confident that Beijing would achieve 8 percent growth -- the minimum deemed necessary to hold down unemployment.

Sun see the risks on the upside because investment is likely to be stronger than now expected, while consumption will benefit from government incentives and the wealth effects of rising property and stock markets.

Sun's bullish forecast of 10 percent growth for 2010 is eclipsed by that of Su Chang, an economist with CEB Monitor, a Beijing consultancy, who has pencilled in 10.2 percent for next year on the assumption of a rebound in exports.

If the U.S. economy grows 3 percent, China's exports can jump 15 percent, Su said.

Even if the U.S. economy remains weak in 2010 and Chinese exports are flat, that would be much better than the 22 percent plunge so far this year in overseas shipments. As a result, China would still be able to achieve 9 percent growth, Su added.

Projections for China's trade surplus vary widely due to differing assessments of the strength of domestic demand and the speed with which export markets will recover. The median forecast is for the surplus to fall to $230 billion this year from $295.5 billion in 2008 before rebounding to $253.5 billion in 2010.
STAYING LOOSE

Underlying China's recovery is the rapid execution of a 4 trillion yuan stimulus package, announced on November 9, and a record-breaking surge in lending by China's state-owned banks.

Banks lent a staggering 7.37 trillion yuan in the first six months, almost 25 percent of annual GDP.

It is here that the biggest risks to China's economy lie: analysts shake their head at the thought of the bad loans that lax lending will spawn, while regulators are openly fretting about new real-estate and stock market bubbles.

The consensus among analysts is that China will not raise interest rates or reimpose credit caps this year given Beijing's concern that economic recovery is not yet on a solid footing.

With inflation in negative territory and the global recovery in a fragile state, we expect macro policies to remain loose until 2010, Merrill Lynch economists said in a note to clients.

The Reuters poll suggests consumer prices will rise 2.5 percent in 2010 after dropping 0.5 percent this year.

Tao Wang with UBS in Beijing said the current shock and awe phase of stimulus was drawing to a close. An abrupt shift in policy was unlikely, but policymakers would probably enforce lending regulations more strictly and push up money market rates.

The problem, she said, was that this might not be enough to rein in dangerously fast lending growth in time.
In that case, a further rise in inflation expectations and asset prices, and concerns of the quality of bank assets, could lead to a more abrupt macro tightening later. When that happens, while annual growth for 2009 may still exceed our current forecast of 7.5 percent, a 'double dip' of growth could occur in the beginning of 2010, Wang said in a report.

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