Optimism over China's 2014 growth despite challenges

Qu believes that the Chinese economy could expand by above 7.5 percent for the first half of 2014, before some moderation in the second half of the year, reflecting the impact of the base effect.

Although slower restocking activity may pose some downside risks in the near term, Qu maintained that China's growth will be supported by such factors as improving external demand, strong infrastructure investment, resilient consumer spending, and reform dividends.

According to the senior economist, 2014 in China will be a year of reform, covering areas ranging from taxation and land markets to financial liberalization and service sector deregulation.

This should fuel growth by unleashing the power of private investment and consumption, offsetting the short-term pain experienced during the early stages of reform, he said.

To mitigate risks, Qu urged China to curb shadow lending while regulating local government borrowing, rather than tightening overall credit conditions for the real economy.

Wang Tao, chief China economist at UBS, projected China's GDP growth in 2014 at 7.8 percent, slightly higher than in 2013.

"We only expect a modest slowdown in domestic investment, which should be more than offset by stronger export and domestic consumption growth," she wrote in a research note.

Wang, however, said there are three questions about China's macro policy and outlook in 2014 and significant unease over them in the market. These three big issues are excess credit growth, local government debt, and liquidity squeezes and rate spikes in the interbank market.

She maintained that China will pursue a slightly more prudent monetary policy and will better regulate the shadow credit market in 2014, slowing the pace of leverage but refraining from outright deleverage.

Local government debt will be put on a more sustainable and transparent path but will continue to grow. Periodic liquidity squeezes and rate spikes will likely persist but the negative impact on overall growth should be limited, Wang added.

Alaistair Chan, an economist with Moody's Analytics, said China's economy enters 2014 with solid momentum, low inflation, and rising household incomes.

Chan expects China's economy to expand by 7.5 percent in 2014 and make modest progress toward rebalancing.

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