Growth prospects clouded by uncertainty: Think tank
China’s growth prospects this year are overshadowed by unprecedented uncertainties, since reform dividends aren’t likely to materialize quickly, downward pressure persists and the global outlook is unclear, the China Academy of Sciences said in a report released on Thursday.
This assessment from a top national think tank offers a grim outlook, even as economists and other institutions provide positive forecasts. Many global banks have recently raised their forecasts for China in 2014 to reflect accelerated growth.
However, the CAS has forecast that this year’s GDP growth rate will slow by 0.1 percentage point from 2013. Official 2013 GDP figures haven’t yet been released, but the CAS estimated the growth rate at 7.65 percent.
“Over a long-term perspective, the reform package offered by the Third Plenum is positive for China’s economy. But in the short run, the consequences are uncertain,” said Chen Xikang, a researcher with the Center for Forecasting Science, which is under the CAS.
A number of negative factors loom. These include the shrinking demographic dividend, overcapacity, choking pollution, risks from the property sector and local government debt, he said.
He said a number of figures for 2013 are of “particular concern”, including the steady decline of the role of consumption in the economy and the deceleration of household income.
Final consumption (including household and government consumption) as a percentage of GDP slid from 56.5 percent in 2011 to 55 percent in 2012, and it’s estimated to have fallen to 45.8 percent last year.
Meanwhile, the economy is increasingly “addicted” to investment, the CAS said, as the ratio of capital formation to GDP probably climbed from 47.1 percent in 2012 to 55.2 percent in 2013.
Household income growth lagged GDP growth and showed signs of weakening. In the first half of 2013, urban household income growth slowed to 6.5 percent from 9.7 percent a year earlier.
The CAS has forecast that retail sales growth in 2014 will pick up a bit to 13.7 percent, while fixed-asset investment will expand 20 percent, the same as last year.
“We can say that China has so far failed to change its economic growth model,” Chen said.
Though many economists are upbeat on recovery prospects in major developed economies, the CAS is less certain, saying there are still many uncertainties.
The CAS forecast China’s total foreign trade will expand 8.2 percent this year, and the trade surplus will widen to $280 billion from $195 billion in 2013.
Growth in trade is expected to contribute 0.1 percentage point to overall GDP growth. In the past two years, foreign trade contributed minus 0.1 percentage point.
Zhang Yansheng, secretary-general of the Academic Committee of the National Development and Reform Commission, said China’s has bid farewell to the era of double-digit growth in foreign trade.