Growth prospects still strong : CASS

By Song Shengxia Source:Global Times Published: 2014-12-27 0:28:01

Report says China to be biggest economic global contributor in 2015

China is likely to continue to make the biggest contribution to the world's economic growth in 2015, although it is still facing the challenges of slowdown and financial fragility, a report by a top government think tank showed Friday.

The Yellow Book of World Economy, released by the Chinese Academy of Social Sciences (CASS) on Friday, came as increasingly polarized views were voiced about China's economic prospect with some remaining sanguine, some expecting a more balanced economy and others concerned about a hard landing.  

The CASS report also followed the conclusion of a key annual economic meeting early this month where China's leadership called for the need to adapt to the economy's "new normal" of lower speed but more sustainable growth.

The probability for the global economy to recover considerably in 2015 is small. By purchasing power parity (PPP), the world economy will grow 3.3 percent year-on-year while by market exchange rates, it will grow 2.8 percent, the report said.

Among the four biggest economies, China and the US will be the two largest engines powering the world economy next year with China likely to continue to be the greatest contributor to the world economy growth, the report said. 

In October, the IMF already said, in an optimistic forecast, that by PPP measurements, China's GDP will rose to $17.6 trillion this year, compared with $17.4 trillion for the US.

"I remain cautiously optimistic about China's economic outlook next year. Indeed China's economy is slowing but it is not falling below a dangerous level and still grows at a reasonably fast speed," said Wang Jun, an economist at the China Center for International Economic Exchanges, a Beijing-based think tank.

"But compared with the US, China's GDP per capita, technology, innovation ability, financial sector as well as military power still lag behind," Wang told the Global Times.

Friday's report came as a slew of recent economic indicators showed the country is going through a rough patch.

Economic growth has slipped to 7.3 percent in the third quarter from a year earlier, and November's weak manufacturing, factory and investment figures suggest annual growth may not hit 7.5 percent. The weak data has prompted economists and research institutes to downgrade forecasts for China's economic growth this year and predicted China may lower its annual growth target to around 7 percent at the national legislative session in March. 

Friday's report warned China is facing the possibility of being trapped by "economic transition syndrome," which means a vicious cycle of weakening of internal driving force for growth, demand for stimulus policies and increasing financial fragility.

China's economy is in transition from an industrial economy into a post industrial economy where both international and domestic markets can no longer support high speed growth of industrial sectors, the CASS report said.

Mismatch between demand and supply is enlarged due to over-regulation in service sectors, causing the economic drive force to weaken, it added.

"But I believe demand for industrial products will still be strong from the international market especially from the countries and region along the 'One Belt and One Road,' as 2015 marks the implementation and kickoff of the strategy," Wang said.

The "One Belt and One Road" strategy, which refers to the Silk Road Economic Belt and the 21st Century Maritime Silk Road, was proposed by President Xi Jinping late 2013.

Xi pledged during the APEC CEO Summit in Beijing in November that China will contribute $40 billion to establish a Silk Road Fund used to support infrastructure construction, development of resources and industrial cooperation for countries along the Silk Road Economic Belt and the 21st Century Maritime Silk Road.

"The problems identified in the report actually have been noticed by top leaders. The government is trying to lead with action, not words," Tian Yun, editor-in-chief of the China Macroeconomic Information Network website, told the Global Times Friday. 

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