Friday Jan 25, 2013
China’s economy is recovering from a “soft landing”, but the big challenge this year will be to prevent overheating while still promoting growth, says the head of China’s National Economic Research Institute.
Fan Gang yesterday told a session on China’s growth prospects at the World Economic Forum in Davos that the economy should grow faster this year than it did last year.
China posted growth of 7.8 per cent last year, its weakest performance since the 1990s, but its economy started reviving at the end of the year when growth rose to 7.9 per cent.
“Now I can say the ‘soft landing’ has landed last year, and now it’s under way to recovery,” said Fan, whose institute is part of the Chinese government.
The recovery would coincide with China’s new leadership. Vice-President Xi Jinping was chosen in November to succeed President Hu Jintao as party leader and he will take over the presidency in the spring.
Fan said growth could be supported by local governors’ plans for infrastructure spending and new housing construction spurred by migration to cities.
The challenge will be, he said, to see how the central government and the banking system can work together to maintain growth while not allowing the added government spending to promote further heavy borrowing and overheating of investments.
If that happens, Fan said, “I do believe that in 2013 China can grow around 8 to 8.5 per cent, and that will lay down a good foundation for the next couple of years.”
Fan said 2013 could also be the year to start the new round of financial, economic, regulatory and social reforms that the Chinese are all expecting.
“The new leadership is now talking quite much about reform and reform and reform, and the restructuring, restructuring and restructuring,” he said.
“We expect the new leadership will mainly keep the direction of reform in a market-oriented direction.”
– AP