7% 'new norm' for expansion

Yu Bin, director of research for the department of macroeconomic Research at the Development Research Center, said on Friday the next two years will be a “window period” in which China would shift steadily toward a new “normal economic state”.JIN LIWANG / XINHUA

Think tank says economy started on two-year shift to lower GDP growth

A leading State think tank said on Friday that China's annual growth target will be around 7 percent in 2015, in line with economists' forecasts that the country's economic slowdown will continue next year.

Gross domestic product is expected to expand 7.4 percent in the fourth quarter, from a five-year low of 7.3 percent in the third quarter, said Yu Bin, director of research for the department of macroeconomic Research at the Development Research Center of the State Council, China's cabinet.

That result would give the country a full-year growth rate of 7.4 percent, lower than its annual target of 7.5 percent.

Yu said maintaining China's macro policies would be beneficial to its economic restructuring, but plans for fiscal or monetary stimulus should still be prepared in case of any sharp economic slump in a short term.

"China's economy could maintain an average annual growth rate of around 7 percent," said Yu, dismissing concerns that the world's second- largest economy may face a hard landing.

Nomura's China Stress Index, a gauge of economic hard-landing risks published on Friday, averaged 101.2 in the third quarter, down from 101.4 in the second quarter, which remains relatively high.

The crackdown on shadow banking activities, moderating inflation, economic rebalancing and property prices easing were factors driving down the index, it said.

Yu described the next two years as a "window period" in which China would shift steadily toward a new "normal economic state".

Two old economic boosters — the heavy chemicals industry and the real estate sector — have reached their peak, he said, and greater tolerance to slipping growth will allow the economy to explore new drivers for sustainable growth.

The latest property industry figures, published on Friday by the National Bureau of Statistics, showed new home prices dropped in 69 of the 70 cities in September from August, one more city than in August.

Yu predicted that property sales are likely to rebound in coming months as easing of property curbs and mortgage rules for consumers who have paid off existing loans gradually have an impact on the market. Home sales slipped 11 percent in the first nine months of this year.

Investment in the real estate sector, however, will continue to slide in the fourth quarter, dragging the nation's annual investment growth to around 15 percent, from 16.1 percent in the first nine months, he said.

The real estate sector accounts for around one- quarter of China's total investment, with the manufacturing sector and infrastructure facilities accounting for one-third and one-fifth, respectively.

Yu said imports and consumption will maintain steady annual growth of 6 percent and 10.8 percent, respectively.

Xu Hongcai, director of the information department at the China Center for International Economic Exchanges, called slower investment growth "a major contributor to current economic slowdown".

Takehiko Nakao, president of the Asian Development Bank, on Thursday encouraged more use of local government bond issues to fund planned structural reforms, including the government's new urbanization strategy.

He said there is also a need to reform inter-governmental fiscal relations to better assign responsibilities for public services provision and allocate revenues between the central and other levels of local governments.