Friday, December 21, 2012

China economic growth likely to pick up: analysts

SHANGHAI: China's economic growth may pick up to above 8 per cent in 2013, as economists expect the government to launch policies to boost recovery.

The country is expected to report 7.5 per cent this year, the slowest pace in recent years.

Economists say investment will remain as the pillar of growth the Chinese economy in the short term, despite the government's push for consumption.

The new government may also ease some current property curbs to achieve immediate growth.

As exports are expected to remain weak, China's growth now largely relies on investment and consumption.

Experts say the country's new leaders need to roll out short-term measures to achieve immediate results and gain public support.

This is likely to start with loosening some control over the property market.

Real estate accounts for about 25 per cent of China's GDP directly and indirectly.

"Trading volume has been decreasing very quickly in the recent market, and this is a big blow to the recent investment," said Gary Liu, executive deputy director of CEIBS Lujiazui Institute of International Finance.

"For the central government, it's probably very difficult to announce that we will give up the real estate market policy because they always want to maintain their image; they care about the housing price. But the local government will loosen the real estate market policy and the price will pick up, probably not as quickly as past years, but still I think has a large space to go."

Consumption is another key growth pillar.

On top of improving income distribution and social security system to encourage spending, experts believe, it is important to encourage wealthy Chinese to spend their money at home.

This group of rich Chinese accounts for about 20 per cent of the total population, but they hold 80 per cent of China's wealth.

"What they buy overseas is mostly branded goods, which Chinese companies don't have," said Sun Lijian, vice dean of the Economy School at Fudan University.

"We need to upgrade our industries and create Chinese brands, which are recognized in the world. Our goal for next year is to attract these rich people to spend in China."

According to experts, consumers in the cities tend to splurge on properties or cars. But there are curbs and heavy traffic to consider.

China is now looking for new ways to drive growth in consumption, and encouraging urbanization could be the answer.

Qian Qimin, co-director of market research at SWS Research Co Ltd said: "For example, when people from the countryside move to towns, they need to buy cooking utensils, home appliances and furniture. This will be a good way to push consumption. Now in cities, consumption has generally reached a plateau. People in cities have own almost all the living necessities."

The Chinese economy is well on its way recovery, but experts say any major changes will have to wait till the ruling party's third plenary session or meeting of top politicians next October.

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