Growth prospects clouded by un­cer­tainty: Think tank

China Daily (Canada) - - BUSINESS - By ZHENG YANGPENG zhengyang­peng@chi­

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.

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