China’s economy to gather steam in 2013

16  January 2013

BEIJING — Official data suggests China’s economy will pick up in 2013, as the global economy is stabilizing and government measures and reforms have come into play, analysts said.

The government announced Thursday that exports gained 14.1 percent in December from one year earlier, up from November’s unexpectedly weak 2.9-percent rise. The value of imports rose 6 percent year on year last month, improving from November, when there was no growth.

Combined with other strengthening indicators revealed last month, including industrial profits and output figures for November and a preliminary HSBC reading on December’s manufacturing activity, the figures have made many hopeful for an economic turnaround.

China’s import volume recovered in October and remained robust through the fourth quarter, indicative of a further recovery of quarter-on-quarter GDP growth, said Royal Bank of Scotland’s chief China economist Louis Kuijs.

The country’s economic growth is likely to accelerate to 8.5 percent this year from around 7.8 percent in 2012, said Lian Ping, chief economist at the Bank of Communications.

A slight improvement in the world economy will contribute to mildly stronger growth in exports this year, as the financial situation in the EU is expected to stabilize, while the US and emerging markets will recover somewhat, Lian said.

“The economy will grow briskly in 2013 if we look at the infrastructure projects fast-tracked by the government in recent months and the momentum of economic reforms,” he said.

The government sped up approvals for the construction of new highways, ports, railways and sewage networks in the second half of 2012, with investment in infrastructure projects greenlighted by the country’s top economic planner exceeding 5 trillion yuan ($795 billion) in the third quarter.

Lian said he expects fixed-asset investment to increase 23 percent in 2013, compared with growth of less than 21 percent in 2012.

Local governments will boost urbanization, a major driver of growth advocated by Chinese leaders, to generate stronger investment demand this year, he said.

In addition, anticipated reforms for the income distribution mechanism and structural tax cuts will likely create more domestic consumption, Lian said.

Zhuang Jian, a senior economist with the Asian Development Bank, said China’s growth bottomed out in the third quarter of 2012 and will probably pick up in the fourth quarter due to increased infrastructure construction and frequent open market operations by the central bank to ease liquidity during the second half of 2012.

There remain some uncertainties for the economy’s recovery, as the export outlook is still shaky and higher inflationary pressure may reduce the chances of further monetary loosening, Zhuang said.

“However, compared with last year, this year will see slightly better performance, with both domestic and external demand picking up a bit,” he said. “Economic growth will at least continue on an upward trajectory in the first half.”

China’s economic growth slowed for seven consecutive quarters until the third quarter of 2012, when it reached a rate of 7.4 percent, because of the global economic downturn and cooling domestic property investment.

The government targeted growth of 7.5 percent last year, a decrease from the 2011 target of 8 percent.

Authorities have vowed to focus on high-quality and efficient growth this year, as well as make efforts to ensure sustainable and healthy development.

A steady recovery in 2013 will create more room for the government to transform the country’s economic development pattern, as it will offset the negative side effects of stimulus measures, Lian said.

He said the government should be cautious in boosting infrastructure construction and preventing overheated investment.

Zhuang said policymakers should not allow the improving economic indicators to make them complacent, as reforms that are needed to make growth more consumption- and technology-driven must not be deferred.