China spending to cushion slowdown

The mainland's economy has shown resilience and undergone a gradual transition towards being driven by domestic consumption, says Goldman Sachs economist Jim O'Neill.

Speaking during a visit to Hong Kong last week, O'Neill - who invented the acronym BRIC to describe the emerging economies of Brazil, Russia, India and China - said a pickup in a series of leading indicators signalled a soft landing for the world's second-largest economy.

Meaningful real wage growth had bolstered domestic sentiment and spending, O'Neill said, though the monopoly position of state-controlled financial institutions was likely to face headwinds as the country's top policymakers urged further openness and market-driven competition.

Elsewhere, Japan was likely to witness a reversal in its economic fortunes caused by a sharp weakening of the yen, which was likely to remain under downward pressure in the short term. The path to recovery will face a handful of structural challenges, including a rapidly ageing population and weak domestic demand.

O'Neill ruled out a hard landing for the slowing Chinese economy, noting that retail sales versus industrial production, which is a measure of the vitality of domestic consumption, had picked up in recent months. The pickup was likely driven by the gradual transition towards a greater share of domestic consumption in the country's economy.

"Growth forecasts from Jim O'Neill" Video by Hedy Bok