GDP growth could hit 7.8 percent next year

The best scenario for the Chinese economy in 2014 would be to achieve 7.8 percent GDP growth, a major think tank said on Monday.

That could be obtained if all the recently proposed reform initiatives are carried out and the global market shows a more robust recovery, said the National Academy of Economic Strategy under the Chinese Academy of Social Sciences.

But the central government must be watchful of a number of uncertainties, especially some problems on the domestic front, the academy said in a report.

If only the same strategies are pursued, there could be more complications to even sustain the 2013 growth rate, which is expected to come in at about 7.5 percent.

The CASS economists warned that there is danger that there would be even greater downward pressure on domestic growth in 2014, as new investment in public infrastructure is becoming less effective, overcapacity remains serious in a number of major industries, growth in consumer spending remains feeble and local government debt financing is approaching an alarming level.

Economists attending the forum where the CASS report was released said China is most likely to see 7.5 percent GDP growth and a 3.5 percent rise in the consumer price index in 2014, maintaining its performance this year.

But they said they have long-term concerns for the economy's investment-dominated growth model, while a consumption-driven new model may still take some time to develop.

They aired their concerns ahead of the upcoming annual Central Economic Work Conference, which is to discuss development targets for next year and further clarify reform measures.

The CASS report said that the government's efforts to stabilize economic growth are still focused on supporting fixed-asset investment, which was the key force driving the third quarter's GDP growth rate up to 7.8 percent from 7.5 percent in the second.

"But the marginal effects of the policy are diminishing, and that will be the main factor hindering future development," it said.

The report suggested a balance between controlling government-led investment and stabilizing growth in the near term, and continually implementing prudent monetary policy.

Meanwhile, improving tax reform, promoting the development of small and medium-sized towns, and strengthening support for exports will be important for economic restructuring.

The report predicted that the growth rate of China's total social fixed-asset investment may slow to 20.1 percent in 2014, down from an expected 20.3 percent this year. The annual fixed-asset growth from 2003 to 2011 averaged 25.6 percent, according to the National Bureau of Statistics.

Fan Jianping, chief economist at the State Information Center, said that the investment growth rate may slow to 17 percent next year, as the financing cost may continue to rise under the high borrowing interest rate.

Consumption growth is also likely to be slower in 2014 amid the weak market demand, and that may contribute less to the GDP, Fan said.

Liu Yingqiu, chief editor of the report and director of the Center for Private Economic Studies under the CASS, said that a continual slowdown of China's economic growth may be still unchanged, as the world's second-largest economy is facing "double restraints" from weak demand and limited environmental resources.

He said that the overall 2013 GDP growth rate is likely to drop to 7.6 percent from 7.7 percent in 2012, because of a possible moderate growth momentum in the fourth quarter. It may be the fourth consecutive year of GDP decrease, down from 10.4 percent in 2010.

If the economic restructuring enables a breakthrough and the change in the pattern of growth goes smoothly, slightly higher growth of 7.8 percent for 2014 is likely, the CASS report forecast.

Fredrik Erixon, director of the European Centre Of International Political Economy, said economic growth can accelerate a bit next year if China's pledge to fast-pedal economic reforms is implemented.

"International demand is likely to improve and Chinese exports already show it is picking up again," Erixon said.