GDP growth could hit 7.8% next year

Yet un­pre­dictable fac­tors home and abroad could re­strain rate at this year’s level, econ­o­mists say

China Daily (Hong Kong) - - FRONT PAGE - By CHEN JIA in Bei­jing and TUO YANNAN in Brus­sels

The best sce­nario for the Chi­nese econ­omy in 2014 would be to achieve 7.8 per­cent GDP growth, a ma­jor think tank said on Mon­day.

That could be ob­tained if all the re­cently pro­posed re­form ini­tia­tives are car­ried out and the global mar­ket shows a more ro­bust re­cov­ery, said the Na­tional Academy of Eco­nomic Strat­egy un­der the Chi­nese Academy of So­cial Sciences.

But the cen­tral gov­ern­ment must be watch­ful of a num­ber of un­cer­tain­ties, es­pe­cially some prob­lems on the do­mes­tic front, the academy said in a re­port.

If only the same strate­gies are pur­sued, there could be more com­pli­ca­tions to even sus­tain the 2013 growth rate, which is ex­pected to come in at about 7.5 per­cent.

The CASS econ­o­mists warned that there is dan­ger that there would be even greater down­ward pres­sure on do­mes­tic growth in 2014, as new in­vest­ment in pub­lic in­fra­struc­ture is be­com­ing less ef­fec­tive, over­ca­pac­ity re­mains se­ri­ous in a num­ber of ma­jor in­dus­tries, growth in con­sumer spend­ing re­mains fee­ble and lo­cal gov­ern­ment debt fi­nanc­ing is ap­proach­ing an alarm­ing level.

Econ­o­mists at­tend­ing the fo­rum where the CASS re­port was re­leased said China is most likely to see 7.5 per­cent GDP growth and a 3.5 per­cent rise in the con­sumer price in­dex in 2014, main­tain­ing its per­for­mance this year.

But they said they have longterm con­cerns for the econ­omy’s in­vest­ment-dom­i­nated growth model, while a con­sump­tion­driven new model may still take some time to de­velop.

They aired their con­cerns ahead of the up­com­ing an­nual Cen­tral Eco­nomic Work Con­fer­ence, which is to dis­cuss de­vel­op­ment tar­gets for next year and fur­ther clar­ify re­form mea­sures.

The CASS re­port said that the gov­ern­ment’s ef­forts to sta­bi­lize eco­nomic growth are still fo­cused on sup­port­ing fixedas­set in­vest­ment, which was the key force driv­ing the third quar­ter’s GDP growth rate up to 7.8 per­cent from 7.5 per­cent in the sec­ond.

“But the mar­ginal ef­fects of the pol­icy are di­min­ish­ing, and that will be the main fac­tor hin­der­ing fu­ture de­vel­op­ment,” it said.

e re­port sug­gested a bal­ance be­tween con­trol­ling gov­ern­ment-led in­vest­ment and sta­bi­liz­ing growth in the near term, and con­tin­u­ally im­ple­ment­ing pru­dent mone­tary pol­icy.

Mean­while, im­prov­ing tax re­form, pro­mot­ing the de­vel­op­ment of small and medi­um­sized towns, and strength­en­ing sup­port for ex­ports will be im­por­tant for eco­nomic re­struc­tur­ing.

The re­port pre­dicted that the growth rate of China’s to­tal so­cial fixed-as­set in­vest­ment may slow to 20.1 per­cent in 2014, down from an ex­pected 20.3 per­cent this year. The an­nual fixed-as­set growth from 2003 to 2011 av­er­aged 25.6 per­cent, ac­cord­ing to the Na­tional Bureau of Sta­tis­tics.

Fan Jian­ping, chief econ­o­mist at the State In­for­ma­tion Center, said that the in­vest­ment growth rate may slow to 17 per­cent next year, as the fi­nanc­ing cost may con­tinue to rise un­der the high bor­row­ing in­ter­est rate.

Con­sump­tion growth is also likely to be slower in 2014 amid the weak mar­ket de­mand, and that may con­trib­ute less to the GDP, Fan said.

Liu Yingqiu, chief ed­i­tor of the re­port and di­rec­tor of the Center for Pri­vate Eco­nomic Stud­ies un­der the CASS, said that a con­tin­ual slow­down of China’s eco­nomic growth may be still un­changed, as the world’s sec­ond-largest econ­omy is fac­ing “dou­ble re­straints” from weak de­mand and lim­ited en­vi­ron­men­tal re­sources.

He said that the over­all 2013 GDP growth rate is likely to drop to 7.6 per­cent from 7.7 per­cent in 2012, be­cause of a pos­si­ble mod­er­ate growth mo­men­tum in the fourth quar­ter. It may be the fourth con­sec­u­tive year of GDP de­crease, down from 10.4 per­cent in 2010.

If the eco­nomic re­struc­tur­ing en­ables a break­through and the change in the pat­tern of growth goes smoothly, slightly higher growth of 7.8 per­cent for 2014 is likely, the CASS re­port fore­cast.

Fredrik Erixon, di­rec­tor of the Euro­pean Cen­tre Of In­ter­na­tional Po­lit­i­cal Econ­omy, said eco­nomic growth can ac­cel­er­ate a bit next year if China’s pledge to fast-pedal eco­nomic re­forms is im­ple­mented.

“In­ter­na­tional de­mand is likely to im­prove and Chi­nese ex­ports al­ready show it is pick­ing up again,” Erixon said. Con­tact the writ­ers at chen­jia1@chi­nadaily.com.cn and tuoy­an­nan@chi­nadaily.com.cn

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