Uncertainty looms amid slow recovery

0 Comment(s)Print E-mail China Daily, December 17, 2012
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China will face a complicated and uncertain situation abroad next year amid expectations that the global economy will grow slowly, according to the conclusions of an annual economic meeting.

The two-day Central Economic Work Conference, which ended on Sunday, warned those in attendance about the increasing dangers of protectionism and the pressures that could arise from potential inflation and asset bubbles.

"The world economy has changed from the fast development period before the crisis to a period of deep transformation," said a statement issued after the meeting.

Economists also warned that the largest uncertainties for the Chinese economy next year may come from outside, as the European debt crisis lingers and the US economic recovery remains sluggish.

Weaker demand from abroad has hit Chinese exports this year.

In November, the country's exports increased by only 2.9 percent year-on-year, down sharply from 11.6 percent in October.

Total foreign trade expanded only 1.5 percent in the month, making it effectively impossible to meet the country's goal of seeing a 10 percent increase for the full year.

Although China's manufacturing activity hit a 14-month high in December, a sub-index tracking new export orders was one of the few such gauges that showed a contraction, falling in line with economists' expectations that the country's exports will remain lackluster in December and into 2013.

The export-driven growth model will gradually lose its advantages, helping the Chinese economy rebalance, said Huang Mengfu, honorary chairman of the All-China Federation of Industry and Commerce.

"To strengthen international cooperation and improve internationalization will be the chief way of solving the global crisis," Huang said at a forum in Sanya, Hainan province, on Sunday.

Wang Jianxi, executive vice-president and chief risk officer at China Investment Corp, expressed optimism about Europe's prospects for economic recovery, an outcome that would help China achieve stable growth in the coming year.

"It is possible that the EU will still have room for economic growth because of its relatively advanced capacity for development," Wang said.

Advanced technological innovations and potential reforms to the social welfare system may also help indebted countries rebound, Wang said.

China plans to make its chief source of economic growth domestic consumption rather than exports. The resulting increase in the country's purchasing power will help boost the EU market, he added.

"Because of stronger cooperation between China and the EU, the Chinese sovereign wealth fund and companies will invest more in European projects," Wang said.

Wei Jianguo, secretary-general at the China Center for International Economic Exchanges, who is also a guest economist for China Daily, said the country should try to overcome these difficulties by strengthening its cooperation with the United States.

He suggested the world's two largest economies accelerate their talks over a free trade agreement.

Domestic companies will keep their eyes on bigger opportunities in the overseas mergers and acquisitions market in years to come.

Chen Feng, chairman of HNA Group, the parent company of Hainan Airlines, said the company is ready to see "more actions" in Europe.

HNA Group has conducted two large transactions in the aviation industry this year, one of which had it buy 48 percent of the French airline Aigel Azur.

In the next five to 10 years, the company plans to add to its holdings of overseas assets and increase its revenue, making the value of both equal to 30 to 40 percent of its total portfolio, up from the current 10 percent, Chen said.

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