Business / Macro

China's economy to recover moderately

(Xinhua) Updated: 2013-01-19 17:41

BEIJING - China will witness a moderate economic recovery this year while a rapid rebound in inflation is unlikely, according to a chief economist.

Despite the uncertainty in external markets, which is considered to be the major challenge for China this year, the country is likely to record 8.6 percent economic growth in 2013, Qu Hongbin, HSBC China chief economist said.

The continued slowdown in the US economy and recession of the European Union will continue to weaken China's external demand and keep the country's foreign trade growth under 10 percent this year, said Qu in an interview in Saturday's China Securities Journal.

China's economy posted its weakest expansion in a decade in 2012 by growing 7.8 percent year on year, according to the National Bureau of Statistics (NBS).

In the fourth quarter last year, economic growth quickened to 7.9 percent year on year after government pro-growth measures, ending a seven-straight-quarter slowdown.

Qu attributed the economic recovery to an acceleration in infrastructure investment and a rebound in the property sector, and said maintaining the upward trend to avoid a "W-shape" recovery will be crucial to this year's macro-economic policies.

The major task for policymakers will be ensuring a certain speed of growth in infrastructure investment while keeping the real estate market basically stable, he said.

Qu said the government should maintain the current relatively loose monetary policy, or a moderate growth in social financing, via quantitative tools like cutting required reserve ratio and conducting reserve repos instead of lowering bank interest rates.

Qu said he expected the government to be more active in fiscal policies and take further moves in structural tax reduction, as well as increasing public spending in fields related to people's livelihood.

The moderate growth, which is slower than the country's potential growth rate, will reduce risks of a rapid rebound in inflation and leave room for government policies to stay loose, he said, adding that it is not necessary to raise the bank interest rates.

Qu said China's potential growth rate will stay at around 9 percent in the next few years, a decline from the 10 percent level in the past decade.

This mainly reflects subtle changes in the country's population trend, he said.

In 2012, the number of working-age people in China decreased by 3.45 million to 937.27 million, NBS data showed. It is the first time the country has recorded an absolute drop in the working-age population in "a considerable period of time," according to the NBS chief, Ma Jiantang.

Qu said it is a bit of an exaggeration to say that changes in population trend caused a drop in labor expansion and will lead to a decline in the country's potential growth rate.

In the past ten years, the growth in labor has only contributed less than one percentage point to China's double-digit growth, he said.

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