The changes and challenges for economy in.docx

1、The changes and challenges for economy inThe changes and challenges for economy in 2013Editors Note:In 2012, Chinas economy encountered more difficulties than it would in a normal year. Some difficulties are, so to speak, imported - like the sluggish demand from its major trade partners while they w

2、ere trying, with difficulty, to solve the problems brought by the financial crisis of four years ago.Other difficulties stem from precautions the country has taken to prevent wider trouble - controlling inflation, repressing surging prices in the real estate market, and slowing resource-and energy-i

3、ntensive industries. The main purpose of these efforts is to make the economy less dependent on exports and inexpensive labor, and more on quality production and domestic consumption.A new phase of this endeavor began as the new national leadership, headed by Xi Jinping, emerged from Beijings power

4、transition in November. At the Central Economic Work Conference last week, policy makers decided to muster greater courage and wisdom to take the nations reform and development forward.Societys initial response to the renewed commitment to reform was clear. The Shanghai stock market saw its stronges

5、t rally in two years. But how do economists assess Chinas opportunities in 2013 after studying the Central Economic Work Conference communique? What changes are they looking forward to? And what dangers do they think China should watch out for? We invited five of them to share their views. The econo

6、my slowed for two main reasons: The global economy was weak, and this hit Chinese exports. The other reason was due to property-tightening measures and credit controls which led to a slowdown in property and infrastructure investment starting in late 2011. The government changed its policy direction

7、 in the spring, easing credit conditions and reversing infrastructure spending, which has led to a moderate recovery in recent months.Corporations reduced their inventories throughout much of 2012, and excess capacity became a concern as demand weakened. Corporate profits dropped sharply. But there

8、is less of a push now to reduce inventories, and industrial profits are increasing again in the fourth quarter.The new leadership has set the tone for next year: They will continue proactive fiscal and prudent monetary policies. The new leadership is concentrating on urbanization being the big drive

9、r of domestic demand, which should attract more investment on public infrastructure. But its unclear how they will stimulate consumption.We expect the leadership to push forward in 2013 with measures that have already won wide support. These may include reforms to energy prices and resource taxes, a

10、s well as developing the bond market and expanding pension and health insurance. I think various services, particularly healthcare and public services, should be developed more rapidly.We expect GDP growth to recover from 7.6 percent this year to 8 percent in 2013. Im not sure how much change we wil

11、l see to the countrys growth model. That will only happen slowly. We think consumer price index inflation will rise in 2013, mainly as a result of rising food prices. We think CPI will average 3.5 percent. Non-food inflation may rise because of reforms to utility and energy prices. The most importan

12、t reform should be increasing public spending on services so that migrants can have better access to schools and healthcare, and can have better healthcare insurance, pensions and other benefits associated with a social safety net. This will involve tax and public finance reforms, and will be diffic

13、ult. I think true urbanization will stimulate investment as well as consumption.We expect the US economy to maintain a modest growth rate (2.3 percent), Europe to stagnate and Japan to grow very little. Emerging markets may recover somewhat from 2012 as their exports become more stable and they no l

14、onger have to worry about inflation when setting their monetary policies. For China, this means the rate of increase for exports will become stable at about 8 percent.In the best case, the US will show strong growth if it avoids the fiscal cliff. And the crisis in the eurozone will be resolved. In t

15、he worst case, the US will go over the fiscal cliff, driving down the countrys growth. Or the eurozone crisis will worsen.- Wang Taochief China economist with UBS AG Despite the slowdown, Chinas economic performance this year is still satisfactory, given the global recession and compared with other

16、emerging markets.The countrys fiscal and monetary policies this year were appropriate, showing the governments good assessment of the international situation.The countrys GDP growth this year, I estimate, may be in the range of 7.5 to 7.8 percent. The economy bottomed out in the third quarter and st

17、abilized in the fourth quarter, but it is still hard for the economy to rise above 8 percent for 2012.Looking forward, the global economy still needs five to six years to completely shrug off the recession. I dont think the new leadership will roll out a large-scale economic stimulus package next ye

18、ar. In fact, there is little room for them to maneuver with fiscal and monetary policies, but they can do more with the social welfare system by building more kindergartens, schools and hospitals. Meanwhile, the government has approved a number of mass transit rail projects this year, which will hel

19、p to boost investment in the coming two to three years.The economy for 2013 should improve a bit, with a GDP growth probably ranging around 7.5 percent to 8 percent.Considering the leadership transition next year, steady development should be a primary concern for the central government. They may fi

20、rst promote reform in social security and income distribution.If GDP growth does not exceed 8 percent, it is not difficult to keep the CPI between 2 to 3 percent, as Chinas CPI pressure is mainly decided by the countrys monetary policy.Consumption growth next year will be around 13 to 15 percent, al

21、most the same as this year.Urbanization will be the key driver for Chinas economic growth in the coming decade. I would suggest an urbanization model centered on the second- and third-tier cities instead of super-big cities. Given the imbalances in such a huge country, it could be a down-up model in

22、itiated by provincial governments based on their own experiences. The process mainly stimulates real-estate-related investment.The European Union and Japan may still face a sluggish economy next year, while the US economy will see a slow expansion. Deflation, instead of inflation, is one of their ma

23、jor economic concerns.Emerging economies, which face very similar challenges to China, will see a slowdown in their GDP growth.All that means Chinas imports and exports are not likely to improve much next year.- Wang Haifengdirector of international economics at the Institute for International Econo

24、mic Research Back in December 2011, Fitch said it expected Chinas economy to grow about 8 percent in 2012, and it looks like this has been borne out. We took seriously the authorities stated intention to get asset and consumer price inflation under control, and this has more or less been achieved, w

25、ithout a sharp increase in unemployment.The key limitations are as follows: limited progress so far on rebalancing towards a more consumption-led growth model, and still a lack of clarity about how the buildup of debt in 2009-10 will be dealt with. That debt overhang, as we see it, is a key factor b

26、ehind the Negative Outlook on Chinas local currency rating of AA-. The foreign currency A+ rating, meanwhile, remains well supported at Stable Outlook by Chinas exceptionally strong foreign currency sovereign balance sheet and $3.3 trillion in official reserves.Rebalancing the economy is imperative,

27、 not optional, if a further buildup of structural vulnerabilities is to be avoided.Investment cannot go on growing faster than GDP, or it will start to outstrip even Chinas huge domestic savings, and China would become a current account deficit country, which we think the authorities would wish to a

28、void. One key question is how quickly the authorities make progress on structural reforms to facilitate rebalancing. These could include, but are not limited to, financial liberalization and strengthening of household incomes.We think Chinas economy will grow about 8 percent in 2013. The Central Eco

29、nomic Work Conference conclusions included language on accommodative fiscal policy and prudent monetary policy, which we see as a signal authorities want to prevent a re-emergence of inflation and strong house price growth. We expect consumption to grow faster than investment.Chinas urbanization rat

30、e of about 50 percent on official data - and probably a little higher in reality - is still well below 80 percent for South Korea or the US.The point is how efficiently capital is invested, along with the fundamental macroeconomic constraint of the investment-savings balance. There is another constr

31、aint in terms of the ability of the financial system to grow the credit to fund further sharp rises in investment, which we think is pretty limited, given the banking systems weak capitalization and emerging strains in liquidity.The main risk facing the Chinese and world economy is the resolution, o

32、r not, of the US fiscal cliff. On our base case forecasts, the US does not fall off the cliff, but there will be a meaningful fiscal tightening of about 1.5 percent of GDP in 2013, and the US economy grows about 2.3 percent. For Japan, we expect growth of 1.5 percent. For the eurozone, we expect stagnation in 2013. Fitch forecasts emerging markets will grow 4.8 percent in 2013, up from 4.3 percent in 2012.- Andrew Colquhounhead of Asia-Pacific Sovereign Ratings with Fitch Ratings The economic situation in 2012 was beyond previous expectations. Ma