Analysts expect stronger Chinese economy

17 january 2013

 

Despite data showing signs of weakness, some analysts say the Chinese economy could grow stronger by the year’s end.

 

Amid other analysts’ somewhat gloomy forecasts, Dan Steinbock of the India, China and America Institute said China’s GDP growth is likely to gain strength in the second half of 2012. [Photo/China Daily]

Growth in China’s GDP has slowed for six consecutive quarters, hitting a three-year low of 7.6 percent in the three months ended June 30.

UK-based Barclays PLC recently cut its forecast for Chinese GDP growth in 2012 to 7.5 percent from an earlier projection of 7.9 percent. That followed lowered expectations from Goldman Sachs Group Inc, UBS AG and other global banks.

The country can still reach its GDP target for this year of 7.5 percent, Jin Zhongxia, a researcher for the People’s Bank of China, was quoted as saying by China Securities Journal in late September. The slowdown is likely to have bottomed out in the third quarter before recovering in the fourth, Jin said.

With third-quarter data to come this month, some see a bottoming-out already under way.

“Since February, I have an idea that the Chinese economy is in a soft landing. Its overall development has been stable,” said Dan Steinbock, head of international-business research at the India, China and America Institute, which is affiliated with Georgia’s Kennesaw State University.

“It is true that 7.5 percent growth is a weak mark of growth, but we have to look at the external environment,” Steinbock said.

“The United States is growing close to 1 percent; Japan and Europe are not growing. China’s performance is considered one achievement in the overall environment.”

Further softening is seen in exports, on which the Chinese economy is heavily dependent. Trade data for August showed that exports rose at a slower-than-expected rate of 2.7 percent from a year earlier, due to weakened overseas demand. Meanwhile, China’s imports actually fell by 2.6 percent.

China’s stock market has also been dragged down by reduced manufacturing output and the gloomy sentiment worldwide. The bourse in Shanghai hit a post-2009 low in September.

But as Steinbock sees it, the long-term growth potential for China means it won’t be hit as hard as other economies.

“China is a large emerging economy; it’s where the United States was in the 1920s,” he said.

“So there is a lot of room for China to grow in the long term. If you look at the growth model of the United States, it is almost 70 percent dependent on consumption-driven growth.”

The nature of the US economy, and that of many European countries, makes for a more difficult path to return to economic levels preceding the financial crisis of 2008-09.