OECD: China growth will hit 8.5%

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China's economy was forecast to grow 8.5 percent this year, faster than the central government's target of 7.5 percent, according to the Organization for Economic Cooperation and Development.

Economic expansion in the world's second-biggest economy will grow at an even faster rate of 8.9 percent in 2014, the Paris-based organization said in a report released yesterday.

The OECD said the key to a sustainable rise in China's domestic demand is the full implementation of economic reforms that will foster socially inclusive urbanization.

"The gradual pick-up in activity provides a strong background for the ambitious reforms China needs to put in place to continue on the road to prosperity," Jose Angel Gurria, secretary-general at the OECD, said in Beijing. "We are encouraged by the new leadership's policy vision and welcome its emphasis on initiatives to make growth not only strong, but also inclusive and sustainable over the years ahead."

The reforms include interest rate deregulation, opening markets dominated by state-owned enterprises to competition, increasing the land supply, giving migrant workers more benefits of economic development, taxing carbon emission and deregulating energy prices, the OECD said. The new Chinese leadership faces challenges such as sustaining growth, reining in rising prices and narrowing income gaps.

Wage growth among migrant workers in the Pearl River Delta region will accelerate to 9.2 percent this year from 7.6 percent in 2012, Standard Chartered Bank said in a report published yesterday. The British lender said the higher wages reflect better productivity, but they will eventually spill over into the prices of goods and broaden inflationary pressure.

Earlier this year, China pared its growth target to 7.5 percent from 8 percent, signaling the government wants to cut reliance on exports and investment to rebalance the economy.

The OECD said the biggest potential risks for China are slowing export demand and domestic inflation.