The Prospect of China's Economy and Policies in 2007

China's economy will expand by 10.5% in 2006,supported by unexpected strong export and domestic demands.Considering the still favorable world economic circumstance and strong growth of fixed asset investment and consumption,we think China's economy will maintain the growth rate of about 10%.The rise of PPI will become slow because of the lessening inflation pressure from the oil price,while the rise of CPI will get rapid because of the increase of price of grain and related products.The bigger trade surplus will aggravate China's imbalance in world payment in 2007.Under these circumstances,the main economic policy will focus on two aspects.One is to control the over-supply of liquidity;the other is to unify the corporate income tax for domestic and foreign-funded enterprises.