China Economy

Mainland economic growth expected to continue

Economists expect rebound to continue from the fourth quarter that may have pushed GDP to 7.7pc, but some still see risks of hard landing

PUBLISHED : Friday, 18 January, 2013, 12:00am
UPDATED : Friday, 18 January, 2013, 5:27am


Related topics

The mainland economy may have grown close to 8 per cent last year, with economists saying the gain in momentum starting late last year is likely to continue.

Economists surveyed by Bloomberg estimated growth of 7.8 per cent in the fourth quarter, rebounding from a more than three-year-low of 7.4 per cent in the previous quarter. For the full year, the consensus was for growth of 7.7 per cent, the slowest since 1999.

Premier Wen Jiabao may express satisfaction at an annual legislative meeting in March when he wraps up his decade-long term of running the world's second-largest economy, given he has been able to achieve stable economic growth despite a slump in global trade and business activities.

Gross domestic product grew 9.3 per cent in 2011. The forecast expansion would exceed the official annual target for GDP growth of 7.5 per cent. Trade growth remained one of the world's best despite diving to 6.2 per cent from 22.5 per cent in 2011.

Foreign direct investment fell for the first time since the 2009 global financial crisis, but its share of global investment rose. Inflation stayed benign. "We believe an improvement in GDP would reinforce positive market sentiment," Standard Chartered Bank analysts said. "This growth momentum should continue in 2013."

The bank projected fixed-asset investment to have grown 20.7 per cent last year, with a significant pickup in investment in the infrastructure sector. Industrial production and retail sales might have gained slightly last month from November.

The World Bank said China's growth could accelerate to about 8.4 per cent this year due to monetary easing, fiscal stimulus and more rapid approval of large investment projects. But for the new leadership, it may be too early to cheer. The new leaders will no longer enjoy the luxury of high economic growth as did their predecessors, who saw GDP grow an average 10 per cent in the past decade. They are instead facing a list of daunting problems: widening wealth gap, excessive industrial capacity, rising local government debt, an ageing population, serious pollution in major cities, and opposition from interest groups against any reforms to correct these problems.

A Bank of America Merrill Lynch survey of fund managers found 63 per cent still anticipated a stronger mainland economy this year, but one in seven saw a hard landing as the top risk.

While inflation was just 2.6 per cent last year, some analysts expect it to hit 4 per cent in the second half because of an economic upturn and a low comparison base, pressuring Beijing to shift to a tighter policy bias.

"In 2012, the macro environment was anaemic to asset prices in the first half but turned increasingly supportive in the second half. In 2013, we expect exactly the opposite," Bank of America Merrill Lynch said.