Trade and con­sump­tion growth ‘to slow’

China Daily (Hong Kong) - - FRONT PAGE - By CHEN JIA chen­jia1@chi­nadaily.com.cn

The ex­pan­sion of China’s ex­ports and con­sump­tion may de­cel­er­ate fur­ther in the sec­ond half of the year due to weak over­seas and do­mes­tic de­mand, adding head­winds to over­all eco­nomic growth, a re­search cen­ter with the coun­try’s top eco­nomic plan­ning body has fore­cast.

The out­look was is­sued by the State In­for­ma­tion Cen­ter on Wed­nes­day, which is un­der the National De­vel­op­ment and Re­form Com­mis­sion.

The cen­ter said that dur­ing the sec­ond half of 2013, the to­tal value of China’s trade might in­crease more slowly than it did in the first half, af­fected in part by the emerg­ing ef­fects of a stronger yuan.

It fore­cast full-year ex­port growth would be about 9 per­cent, down from 10.4 per­cent in the first half, while im­ports might rise 7.3 per­cent, com­pared with 6.7 per­cent in the first half.

The full-year trade sur­plus is likely to widen to $280 bil­lion by the end of this year, from $108 bil­lion in the first half, the cen­ter said.

“Weak ex­ter­nal and do­mes­tic de­mand will re­main the key fac­tors in­creas­ing the down­side risks for China’s econ­omy in the third and fourth quar­ters,” said Lian Ping, chief econ­o­mist at the Bank of Com­mu­ni­ca­tions Ltd.

In ad­di­tion, as house­hold in­comes are likely to in­crease more slowly and prop­erty prices re­main high, con­sumer con­fi­dence could weaken and cur­tail con­sump­tion.

The cen­ter fore­cast that full- year re­tail sales may in­crease by a nom­i­nal 13 per­cent, but the real rate of growth may be 11.3 per­cent, which would be slower than in the first half.

Ac­cord­ing to the National Bureau of Statis­tics, re­tail sales in­creased by a nom­i­nal 12.7 per­cent in the first half.

Pol­i­cy­mak­ers are likely to an­nounce fur­ther re­forms in the com­ing months to foster con­sump­tion as a new eco­nomic growth engine, the cen­ter said.

A re­port from the Bank of Com­mu­ni­ca­tions in­di­cated that last month, house­hold wealth was at its low­est point so far this year, de­pressed by slower eco­nomic growth and weak cap­i­tal mar­kets.

More­over, slow­ing in­come growth has started to weaken house­hold spend­ing plans, which may fur­ther cool re­tail sales, the bank said.

“There is still con­sid­er­able un­cer­tainty about the neart­erm growth out­look,” said Zhu Haibin, chief econ­o­mist in China with JPMor­gan Chase & Co.

“We ex­pect more fine-tun­ing mea­sures in the com­ing months. The scale and pace of pol­icy fine- tun­ing will be im­por­tant to gauge the growth out­look in the sec­ond half,” said Zhu.

He said the fine- tun­ing will also be in­dica­tive of the re­form agenda ex­pected to be an­nounced at a ple­nary ses­sion of the de­ci­sion-mak­ing Cen­tral Com­mit­tee of the Com­mu­nist Party of China to be held late this year.

In July, the State Coun­cil at­tempted to restore mar­ket con­fi­dence by com­bin­ing the tar­gets of sta­ble growth and eco­nomic re­struc­tur­ing.

Wendy Liu, an an­a­lyst from No­mura Se­cu­ri­ties Co Ltd, said on Wed­nes­day that high­end con­sump­tion is likely to be re­strained by a long-term anti-cor­rup­tion cam­paign.

How­ever, con­sump­tion in the mass mar­ket is likely to demon­strate steady im­prove­ment in the sec­ond half.

“More money may be spent on cus­tom­ized and high­qual­ity prod­ucts and ser­vices, and com­pa­nies in­volved in e- com­merce, on­line games and smart­phones may per­form bet­ter in the cap­i­tal mar­kets,” Liu said.

Al­though re­cent eco­nomic in­di­ca­tors were dis­ap­point­ing and even aroused mar­ket worries about a hard land­ing, “I think the con­cern is un­nec­es­sary”, said Qu Hong­bin, chief econ­o­mist in China with HSBC Hold­ings Plc.

“The govern­ment now still has room to pur­sue mod­er­ate and mini-stim­u­lus (pro­grams) to avoid growth slip­ping be­low the bot­tom line.”

Qu said that the most im­por­tant fac­tor that can sta­bi­lize growth of the world’s sec­ond- largest econ­omy is the huge po­ten­tial of ur­ban­iza­tion.

The process is likely to trans­form 260 mil­lion ru­ral mi­grant work­ers into ur­ban con­sumers and boost do­mes­tic de­mand.


China’s ex­ports may de­cline fur­ther in the sec­ond half of this year, drag­ging down an­nual ex­port growth to 9 per­cent and cre­at­ing a trade sur­plus at the end of the year of pos­si­bly $280 bil­lion, ac­cord­ing to an of­fi­cial fore­cast.

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