10 predictions for China's economy in 2015 (Part II)

By Zhang Rui: 0 Comment(s)Print E-mail China.org.cn, November 5, 2014

In a two-part series, China.org.cn gives a perspective on 10 predictions for China's economy in 2015. This is Part II of the series.

Editor's note: Warren Buffett said the future is always uncertain. As China is in a special phase of transformation from an old norm to a new one, it is very difficult to make future predictions, because every rule and routine would probably be broken and many "impossibilities" may become realities in the new era. Based on serious discussion and selection, here are the 10 most important predictions for the next year.

Customers select vegetables at a supermarket in Shanghai, east China, Feb. 14, 2014. [Xinhua]

6. Inflation will be higher than 2014, with reduced pressure.

Predictions expect China's consumer price index (CPI) to rise 2.4 percent year-on-year in 2015, therefore general price rises will be higher than last year. But CPI growth is expected to be moderate, and the pace throughout the whole year will be "high at the beginning and low at the end." Firstly, in terms of statistics, the carryover effect of 2015 will be more than that of this year. Secondly, food supplies (especially pork) will continue to decline, and food prices will face upward pressure. Lastly, in the fourth quarter of this year and the first half of next year, the real estate market and the economy as a whole will probably be better than the last half of next year. So the general economic demand will be "high at the beginning and low at the end."

It is predicted that PPI will continue its negative growth next year. Considering the economic goal will be lowered next year, the urgent situation in the excess capacity of industrial goods will not improve significantly, steady economic growth is having a weaker effect in raising the month-on-month growth of PPI. It'll take some time for PPI to return to positive year-on-year growth. Although during the round of regulatory reform in 1993, capacity was sharply cut, this time macro-economic policies stress that there have to be bottom line considerations and the bottom line of systematic financial risks needs to be kept to, capacity reduction will be more moderate compared to the last round. Even though since 2013, government organs of or above ministry level issued documents ordering capacity cuts, excess capacity hasn't been forcefully removed. This means it will take more time than the last round for industrial goods to reach a supply-and-demand balance and for PPI to achieve positive growth.

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