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China's GDP growth in 2014 may drop to 7.5%: expert

 

China's economic growth was 7.7 percent in 2013, just above the target of 7.5 percent set at the beginning of the year, the National Bureau of Statistics said on Monday

Niu Li, an expert with the State Information Center, a think tank under the National Development and Reform Commission, forecast the growth rate would slip back to 7.5 percent in 2014 because of domestic challenges such as overcapacity, fiscal risks and rising property prices

"There is still no sign that 2014 will see a round of economic expansion in China. Profits of heavy industries and manufacturing industries will remain low, and it will be unlikely for them to survive by relying on their main activities. That will compel major businesses to invest in areas that can make quick money, which may increase their financial risk," he said

Above-scale industries realized increased their added value by 9.7 percent in 2013. The total profit of above-scale industries reached 533.38 billion yuan ($87.9 billion) in the first 11 months, 13.2 percent up year-on-year. But the profit of the main activities in those industries only increased 4.4 percent, the National Bureau of Statistics announced on Monday

Dealing with real estate bubbles will be vital in 2014 as the industry, if it collapses, will lead to risk not only in the financial system but also the daily life of ordinary Chinese, Niu said

Externally, Niu dismissed the optimistic attitude held by some international organizations, including the International Monetary Fund and the World Bank. He said the global economy will recover, but with a very small margin

He predicted emerging markets would still suffer great downward pressure, and that Europe and Japan will continue to struggle, despite a noticeable recovery from the United States

Despite the central government's vow to keep an appropriate liquidity level in 2014 following cash crunches in June and December of 2013, Niu warned the liquidity will not be as large as in the past, as a shift to tighter monetary policy is coming

Other economists are divided on the forecast for this year. Ma Jun, the chief economist at Deutsche Bank Greater China Region, said he sees a much more optimistic picture in 2014 than the previous year, and the country's GDP growth in 2014 is likely to hit 8.6 percent

He said the economy will continue to recover as overcapacity industries, such as solar power and cement shipbuilding improve their relations between supply and demand

In addition, he said China's exports are slowly recovering from stagnation in the last quarter in 2013, when they increased nearly 20 percent on the previous quarter

Market confidence will increase if the government is willing to show more sincerity in reforms, such as to apply the approach of the negative listcurrently in operation only in Shanghai Free Trade Zone to specify areas that are off-limits or come with restrictions for foreign investorsto a broader scale

It would be better, he said, if the government is able to issue a timetable for gradually removing the areas being listed and exert greater openness in investment

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