EU sees Chinese GDP flat at about 7.7% through 2014

The European Union expects China’s economy to grow 7.7 percent this year, with a “similar” level in 2013 and 2014, according to a report issued Wednesday that affirms previous forecasts of slower-paced expansion in the country.

“Given the weakness of external demand, and likely sluggish demand from the domestic private sector, the current outlook for China largely hinges on whether reported measures to accelerate public investment projects, and some targeted fiscal measures directed towards consumers, will prove sufficient to generate a substantial improvement in domestic prospects,” the report said.

The projections are in the autumn European Economic Forecast from the EU’s executive body, the European Commission. The seasonal report on economic growth around the world details conditions in the 27-member EU along with descriptions of other big economies such as China, the United States and Japan.

In 2011, Chinese gross domestic product increased by a far more robust 9.2 percent. Officials recently reported third-quarter GDP growth of 7.4 percent, the slowest rate in over three years.

The EU report noted recent approvals by China’s National Development and Reform Commission to spend about 1 trillion yuan ($157 billion), or 2.5 percent of last year’s GDP, on dozens of infrastructure projects to perk up the economy.

“These are not entirely new projects,” it said, “but their accelerated approval is expected to help underpin a stabilisation of growth through to the end of this year.”

“Consumer spending should also prove fairly resilient,” according to the EU. “Real interest rates have risen as inflation has dropped back, which raises returns to households, [which] keep a substantial part of their wealth in the form of bank deposits. Together with the continued steady growth of wages, this should prevent a sharp slowdown in consumption spending.”

The report said China’s pace of growth was faster than previously forecast and will likely be flat at 7.7 percent next year before inching up to 7.8 percent in 2014.

Wednesday’s report comes a day between the re-election of US President Barack Obama and the start of China’s once-a-decade transition of power through a Party congress.

The EU report is available at: http://ec.europa.eu/economy_finance/publications/european_economy/2012/pdf/ee-2012-7_en.pdf

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