Experts: China expects stable economic growth in 2012

(Ecns.cn)--China's economic growth has been slowing throughout 2011. While the consumer price index (CPI) stayed high, its GDP growth dipped to 9.1 percent in the third quarter. Other indicators are the Shanghai and Shenzhen Stock Exchanges which closed at 21.68 and 28.4 percentage points respectively on December 30. Finally, the yuan exchange rate rose beyond 6.3 to the dollar for the first time in 18 years before markets closed for the New Year break.

Taking these signs into ccount, China's top leaders drew up a blueprint for the country's economic development in 2012, aiming for relatively stable growth in the face of a grim global outlook.

On December 14, a three-day economic conference was held in Beijing, at which delegates all agreed on a core theme for next year's economic and social development: "making progress while maintaining stability," reported CNC World, a 24-hour TV news channel owned by Beijing-based Xinhua News Agency.

The Globe magazine has also spoken with economic experts to analyze and predict future development trends in commodity prices, stock indexes and exchange rates and see if China's economy can achieve a soft landing.

Data from the National Bureau of Statistics show that China's CPI dropped to 4.2 percent in November 2011 from last year's July peak of 6.5 percent.

Yet, even with the sharp fall in November, it still rose 5.5 percent year-on-year from January to November—well above the government's full-year inflation control target of 4 percent.

Commodity prices have been soaring on the whole, with the price of pork rising to over 40 yuan per kilo in some areas. And there are still factors that may push up prices, including price increases triggered by higher costs of raw materials and imported inflation, pointed out the CNC World.

In this regard, experts told the Globe that China's inflation would go down in 2012, and prudent monetary and proactive fiscal policies will therefore be the government's major focus.

"Although China's latest CPI has declined to 4.2 percent, the annual average CPI will still stand above 5 percent and inflation pressure remains high. Even though the inflation outlook in 2012 will probably be better, we still need to reinforce and control it by sticking with the current prudent monetary policy," Lu Suiqi, a professor at Peking University commented during an interview with CNC World.

Regarding an analysis of whether China's economy would suffer a hard landing, Liu Yuhui, director of the China Economic Evaluation Center of the Institute of Finance and Banking under the Chinese Academy of Social Sciences, concludes this is less likely to happen in 2012, but a soft landing is perfectly possible.

The economy may see a low, U-shape growth in 2012, predicted Liu Yuanchun, vice head of the School of Economics of Renmin University, specifically, "Economic growth may slow down during the first two quarters, and regain its momentum in the third quarter; in general, growth would be modest."

Zhang Yansheng, director of the Institute for International Economics Research of the National Development and Reform Commission, predicted that China's growth rate would stand at around 8.4 percent and the inflation rate at about 3 percent. These figures are in accordance with predictions from international organizations, including the World Bank.

Besides continuing to make efforts to control inflation, property market regulations will also be maintained next year to ensure housing prices return to a "reasonable level," noted the CNC World.

Statistics show that housing prices have been witnessing a fallback since September 2011. In total 1,400 real estate agencies in Beijing have closed down due last year's dull market, revealed a real estate agency.

Wang Xiaoguang, a researcher with the Chinese Academy of Governance, estimated that housing prices in 2012 may drop by 10-20 percent, but neither a dramatic fall nor a property crash is likely to occur.

"The slump in the real estate market will affect investors and consumers, but the impact will be limited and can be brought under control," is the opinion of Chen Guoqiang, a professor at the Peking University and deputy chairman of the China Real Estate Society.

Wang Xiaoguang added that housing prices are returning to reasonable levels due to the new property policies, which will "only do China's economy good."

While encouraging investors in the country's property market, the Chinese government also showed confidence in the stock market in 2012.

"Investors should be confident in China's stock markets," said Guo Shuqing, chairman of the China Securities Regulatory Commission (CSRC)， on December 30.

Though China's A-share market was inevitably affected by the turmoil in global financial markets and economic restructuring at home, Lu Zhengwei, chief economist at Industrial Bank, told People's Daily that those are just the apparent causes of the bear market.

The root cause lies in the A-share market's inherent defects and the country's tight monetary policy in 2011, the People's Daily quoted Dong Dengxin, director of the Finance and Securities Institute at Wuhan University of Science and Technology, saying that the A-share index recently fell below 2,245 points, and basically bottomed out, providing a good opportunity for value investors.

Long-term systemic construction for the stock market is the key factor for promoting the healthy development of the market, said Lu. In addition, he believes that a proper information dissemination system should also be established in the stock market.

Without a proper information system, investors' interests can not be protected. A crack down on insider trading must be resolutely committed to as well, Lu added.

China has the world's second largest GDP, second largest stock market, and fifth largest bond market. More importantly, the country has a number of strong enterprises in the real economy which have contributed enormously to its rising economic clout. Some of these enterprises have already gone public, and the rest are ready to go public, added the People's Daily.

Meanwhile, China will also aim in 2012 to keep the yuan's exchange rate "basically stable" while deepening interest rates and rolling out exchange rate formation reforms.

Wang Xiaoguang noted that neither unilateral appreciation nor sharp depreciation are likely on the horizon for the Chinese yuan. "According to the current market, the yuan's exchange rate will generally remain stable or go down slightly," Wang said.

Chinas four major state-owned banks saw deposits fall by 400 billion yuan in the first ten days of December, according to Taiwan's Commercial Times.

Huo Deming, a professor at the National School of Development at Peking University, predicted that the yuan would keep appreciating into 2012, but perhaps at a modest speed if the world economy continues to slump."