Economy headed for soft landing

China's economy remains imbued with opportunity and hope, an economist said over the weekend, downplaying the risk of hard landing for the world's second largest economy.

The Chinese economy, which has maintained a high growth rate of about 10 percent for nearly 30 years thanks to its demographic dividend as well as the reform and opening-up policy, is set to achieve a soft landing in years to come, Lu Ting, chief China economist with Bank of America Merrill Lynch, told a forum in Hong Kong on Saturday.

The economic growth hinges on the country's rising levels of education and acceleration of urbanization, Lu told the forum, predicting that the GDP growth will gradually slow to 6 percent by 2020 but would remain high compared to the world's average.

The sheer size of the economy adds more clout to its growth, he said.

Lu's remarks are encouraging for the new leadership which has recently emphasized the need to press forward reforms in a way that creates a sustainable growth model without causing near-term wild swings.

With a slew of pro-growth fine-tuning policies from the central government that include a tax break for small- and micro-size enterprises, the economy is gaining steam after hitting a three-year low of 7.6 percent in the first half, according to data from the National Bureau of Statistics.

The HSBC flash Purchasing Managers' Index (PMI) reading for August released Thursday jumped to 50.1 percent from the previous month's final reading of 47.7, offering the latest sign that the economy is stabilizing.

In a note sent to the Global Times on Thursday, Lu said "the improved sentiment will surely support the official PMI" due on September 1.

Lu Zhengwei, chief economist at Industrial Bank Co in Shanghai, also expressed optimism on an improvement in the August economic indicators at large.

The economy will grow at a slightly accelerated pace in August, Lu said in a research report sent to the Global Times on Sunday, which also points to a reduced risk of turbulence faced by the economy in the remainder of the year due to problems such as overcapacity.

The latest uptick seen in the economy was mainly due to a rebound in external demand, which may serve to prop up the market sentiment of especially smaller exporters, the main participants of the HSBC PMI survey, for a while, as the year-end holidays in overseas markets would give a seasonal boost to export orders, Zhang Lei, a Beijing-based macroeconomic analyst with Minsheng Securities, told the Global Times on Sunday.

Expressing his skepticism on the sustainability of such a seasonal boost, however, Zhang noted that domestic demand has yet to do its part to drive the economic growth.

But he said "the Chinese economy has been weaning off the investment-led growth path, and a slowing economy during the process of restructuring should be of little concern."

Both external and domestic uncertainties will be well addressed in pushing forward with the economic reform, Zhang stressed, and "China's economy won't go through a radical, shock therapy."