Economy to expand steadily

Statistics chief upbeat over prospects for 2014 despite challenges ahead

China's economy will maintain stable and moderate growth momentum in 2014, the Year of the Horse, the country's top statistician said.

The forecast from Ma Jiantang, head of the National Bureau of Statistics, came as figures showed that the economy registered flat growth of 7.7 percent last year.

China will maintain good momentum with stable and moderate growth this year because there are positive conditions to support such a trend, Ma says.

He declined to release the growth target for 2014, saying this will be set in early March when the annual national legislative session opens.

Last year's 7.7 percent growth was the same as in 2012, beating the government's goal of 7.5 percent.

With global economists forecasting China's economic climate in 2014, Ma said the "fundamental layout" of the country's growth must be grasped in order to plan ahead.

He says that urbanization, industrialization and modernization in the country's information technology and agricultural sectors are "steaming ahead".

"Tremendous demands will be generated not only for investment but also for consumption, in addition to improving supply efficiency," he said at a news conference on Jan 20.

China's export prospects will be boosted as the global economy moves toward recovery, Ma says, citing the World Bank's latest global forecast, which foresees overall growth rising to 3.2 percent this year from 2.4 percent in 2013. "The external environment in 2014 is likely to be better than last year, which is conducive for us to secure steady growth in exports."

Louis Kuijs, chief China economist at the Royal Bank of Scotland, says: "We expect China to benefit from improved global growth this year. Faster world trade growth should support China's growth via stronger exports and corporate investment."

Last year, China's imports and exports were valued at $4.16 trillion, an increase of 7.6 percent from the previous year, according to the statistics agency, which also reported positive data for industrial output, retail sales and fixed-asset investment.

Ma says a series of promised reforms, including those set out in a development blueprint issued by the Party leadership in November, will further tap the potential for national economic development.

He says the service sector, built on the increased incomes of urban and rural residents last year, will gain momentum this year.

However, Ma warns that the foundation for economic growth still has to be consolidated, the risk of local government debt must be prevented and greater efforts must be made to weed out outdated production capacity.

Chang Jian, a senior economist in China at Barclays Capital, a British investment bank, says he expects China's economic growth to slow to 7.2 percent this year and inflation to rise to 3.1 percent from 2.6 percent in 2013. "We look for some rebalancing of the Chinese economy in 2014 amid slower growth," Chang says. "Innovation and reforms will be key to a soft landing of the Chinese economy over 2014-15."

This year will test the government's ability to push forward complicated reforms, she says.

Chang says China's economy faces six major challenges - overcapacity, property bubbles, local government debt, the shadow banking system, accelerating interest rate liberalization and environmental degradation.

The government needs to strike a balance between stable growth, containing financial risks and adjusting the economic structure, she says.

Zhu Haibin, chief China economist at JPMorgan, says the growth outlook for 2014 largely depends on the sequence of economic reforms and their near-term impact.

"Viewed from a positive perspective, these reforms, especially the removal of government administrative controls and opening private- sector investment, could generate new growth."

However, credit-slowing, tightened local government debt and spending, and production adjustments to correct overcapacity in some key manufacturing sectors could be a drag on near-term growth momentum. "We maintain our full-year GDP forecast at 7.4 percent in 2014," Zhu says.

Yu Ran in Shanghai contributed to the story.

Contact the writers through zhaohuanxin@chinadaily.com.cn

(China Daily Africa Weekly 01/24/2014 page14)