China Economy

China's economy to rebound in 2013, experts say

New leadership and favourable economic data from the past two months prompt predictions that economy to grow at 8pc or above next year

PUBLISHED : Friday, 14 December, 2012, 12:00am
UPDATED : Monday, 30 May, 2016, 5:01pm

Forecasts on prospects for the mainland economy are becoming more optimistic on the eve of a top-level meeting.

The Central Economic Working Conference, expected to be held this weekend, comes amid strong feeling among economists and government researchers that growth in the world's second-biggest economy is on the rebound.

Economists who say the mainland's growth will accelerate next year say the new leadership may adopt a slightly expansionary fiscal policy to support investment and consumption as part of the nation's urbanisation push, while keeping monetary policy stable.

Most of the experts expect the mainland economy to expand at a pace close to or above 8 per cent next year. Among the most optimistic, HSBC forecast a growth of 8.6 per cent, while Tim Condon at ING predicted an expansion of 9 per cent on expectation that incoming Premier Li Keqiang will soften housing restrictions.

Favourable economic data in the past two months has also boosted economists' confidence about a recovery that will last into next year.

Maintaining a sound pace of economic expansion in 2013 will provide a desired environment for new leaders to carry out pledged structural reforms.

Beijing also aims to encourage domestic and foreign investors to keep investing in mainland industries as well as the hard-hit stock market, which has been among the worst performers in the world this year.

"Infrastructure investment will gain momentum as recent new projects get up to speed. Meanwhile, property investment is stabilising thanks to rising sales. All this, plus resilient consumer spending, should fuel a rebound next year and beyond," HSBC economists said.

The market has been anxiously waiting for more clues about future economic policies from the Central Economic Working Conference, which, according to a Caixin Media report, may be held on Saturday and Sunday.

A Politburo meeting chaired by Vice-President Xi Jinping on December 4 has set the tone. It pledged to maintain the "continuity and stability" of macroeconomic policies, expand domestic demand and promote a stable investment growth.

The annual working conference is expected to offer more details about economic policies for next year, including setting targets for gross domestic product and inflation.

Chen Xiwen, deputy director of the Communist Party's Central Financial Work Leading Group, indicated last week that the 2013 GDP target may be kept unchanged at 7.5 per cent.

Economists believe the actual economic growth will be higher. Some observers expect the government to budget a bigger fiscal deficit to help infrastructure investment, particularly in areas related to urbanisation.

Barclays Capital recently raised its mainland GDP growth forecast for 2013 to 7.9 per cent from previously estimated 7.6 per cent and forecast for this year to 7.7 per cent from 7.6 per cent.

"For 2013, we look for improving consumption, new investment projects and stabilising exports to sustain growth at its potential level of" about 8 per cent, the investment bank said.

Beijing would likely make fiscal policy "slightly more expansionary", with a budgeted deficit at about 1.7 per cent of the nation's GDP, compared with the 1.5 per cent planned for 2012, said Barclays Capital. Monetary stance would likely be kept "neutral" with benchmark interest rates to "stay flat", it said.

Everbright Securities' Xu Gao forecast inflation to be about 2.7 per cent in 2013, while Mizuho Securities sees inflation at 3 per cent, a small rise from estimated 2.6 per cent in 2012.

Most analysts don't expect any interest rate cuts amid a benign inflation outlook. Some see the central bank continuing with open market operations to adjust liquidity, while some say there's still chance for the central bank to cut banks' reserve ratios, now at historically high levels.

External demand will remain the biggest uncertainty facing China next year. One of the risks it faces, as Mizuho put it, will be "a US economy flirting with recession in the near term".

The State Information Centre, a think tank run by the National Development and Reform Commission, warned that the trade environment would remain severe next year.

The institution forecast that country's economy will likely stay "steady and fast" with growth at around 8 per cent next year.

Exports would likely expand 8 per cent while imports may grow 7.8 per cent in 2013, it said.