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China's economy to see soft landing

China Daily, February 14, 2012

• Experts says that China will manage to weather adversity stemming from thwarted investments and exports to achieve a soft landing in its macroeconomy this year.

  The country's economy is dotted with uncertainties in 2012, as its stern property curbs have weighed on rises in fixed-asset investment and the stiff global headwinds have choked off its exports.

  Pan Xiangdong, chief economist with China Galaxy Securities, said in an interview with Xinhua Monday that China's economy had slowed in 2011 under the government's macroeconomic policies and sluggish external demand.

  China's economy expanded by 9.2 percent in 2011 from a year earlier and 8.9 percent year-on-year in the fourth quarter, according to the National Bureau of Statistics (NBS). The quarterly growth was the slowest in 10 quarters.

  In mid-January, the NBS said China's investment contributed to 54.2 percent of GDP growth in 2011, slightly lower than a year earlier.

  Consumption's contribution was 51.6 percent, up from 37.3 percent in 2010, whereas net export's contribution was negative 5.8 percent.

  "There is not likely to be any dramatic decline in China's economy this year and a soft landing will be achieved," Pan forecast.

  He said one important reason for this is that the country's consumption will continue to maintain the momentum of stable and rapid growth.

  Huang Lin, an analyst with Dongwu Securities, echoed Pan's view, saying that consumption will rise at a faster pace this year due to the government's stimulation policies and a drop in general price levels.

  The central bank made countering inflation its priority with tightened monetary measures last year before unleashing signals of easing these measures in December, when it reduced banks' reserve requirement ratio by 50 basis points for the first time in three years.

  The year-on-year growth of the consumer price index (CPI), a main gauge of inflation, eased to 4.1 percent in December from a peak of 6.5 percent in July.

  In January, the CPI rose 4.5 percent year-on-year, the highest in three months, mainly boosted by food price surges in January amid the traditional Chinese Lunar New Year holiday, said Lian Ping, chief economist at the Bank of Communications.

  At meetings held last week to solicit opinions from representatives of different sectors of society on the draft of a government work report, Chinese Premier Wen Jiabao said that the government is paying close attention to the economic situation in January and the first quarter of this year.

  "We have to make a proper judgment as early as possible when things happen and take quick action," Wen said, adding fine-tuning of macro policies should begin in the first quarter.

  Pan said that the country's macroeconomic policies may be relaxed to some extent, but will still be functioning "under the framework of being prudent."

  As to China's fixed-asset investment, Huang believed that it will slide further this year due to the government's stern curbs on the property market, and the year-on-year growth of investment will slow to about 19 percent.

  China has imposed a raft of measures aiming to calm property prices, including higher down payments, limits on the number of houses that people can own, the introduction of a property tax in some cities, and the construction of low-income housing.

  China will unswervingly maintain this regulation of the property market next year so that housing prices return to a reasonable level, according to decisions made at the country's central economic work conference in December.

  A statement released after the annual economic work conference also said that China will speed up the construction of ordinary commercial residential housing to increase supply and promote healthy development of the property market.

  Wen said last week that the government will work unwaveringly to bring housing prices back to "reasonable levels" while promoting the long-term, stable and healthy development of the industry.

  "As a country that is rapidly industrializing and urbanizing with 1.3 billion people, demand in the housing market is solid in the long run," the premier admitted.

  Jiang Chao, chief macroeconomic analyst for Guotai Junan Securities, reckoned there have been signs that the country's curbs on the property sector will be relaxed this year, a move which would be conducive to the industry's improvement.

  "I see the GDP growth rate slowing to around 8.4 percent this year, but judging from the current situations of government policies and the economy, the odds of a hard landing for China's economy are slim," said Jiang.

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