8% growth predicted for Q2

Enterprises face challenges of sluggish overseas demand, mode restructuring

The recovery in economic growth is likely to continue in the second quarter at a modest pace, Chinese economists said on Friday.

The second quarter's GDP growth may rebound to 8 percent from a lower-than-expected 7.7 percent in the first three months, said Zhu Baoliang, an economist at the State Information Center under the National Development and Reform Commission.

"GDP growth from January to March is acceptable," said Zhu at a forum hosted by China Center for International Economic Exchanges, a government think tank.

Manufacturing companies were expected to start building their inventories since the start of April, especially if global quantitative easing continues and commodity prices bounce back, which can drive up growth, he said.

China suffered a slowdown in economic growth in the first quarter compared with the 7.9 percent year-on-year GDP increase in the fourth quarter of 2012. It was 7.4 percent in the third quarter, a three-year low.

"The Chinese economy now has structural problems, and this is not just about periodically cooling down," said Zhu.

Wang Xuekun, deputy chief of the Research Institution of the Ministry of Commerce, predicted that pressure on exports may continue until the beginning of the second half of the year, although first-quarter official data has indicated a positive shift in growth.

"Industrial companies face the challenge of sluggish demand from overseas markets, and the internal pressures of changing the country's development model," Wang said.

The textiles, shipping and photovoltaic sectors suffered the largest drops in exports in the first quarter, according to the commerce ministry.

International Monetary Fund chief Christine Lagarde said on Thursday, at the opening of the Spring Meetings of the World Bank Group and IMF in Washington, that China's efforts to reshape its business model by focusing more on domestic growth and boosting consumption are seen as critically important steps in the right direction to help promote global economic growth, given the size of the (Chinese) economy, and the pace at which it grows.

A delegation from China including Minister of Finance Lou Jiwei, Governor of the People's Bank of China Zhou Xiaochuan and Vice-Minister of Finance Zhu Guangyao, will attend the three-day meetings of the G20 nations' finance ministers and central bank governors that end on Sunday.

Legarde highlighted China's "ability to gradually reshape its business model by focusing more on the domestic market, in order not to be overly reliant on exports, moving from quantity growth to quality growth, being more attentive to the return on investment, and being willing to expand the consumption in the territory, and to start negotiating on wages".

Zhu Jianfang, the chief economist with CITIC Securities Co Ltd, said he agreed with Zhu Baoliang's prediction of 8 percent growth for China in the second quarter, adding that it was likely to achieve a 7.8 percent increase for the whole year, 0.2 percentage points higher than the government's target.

"Inflation will not be a challenge for this year's macroeconomic policymakers, as CPI is likely to be stable at around 3 percent, while market demand may remain weak," he said.

He added potential risks may appear in the real estate market if the central bank takes no measures to control broader monetary supply, or M2.

"The current monetary policy is suggested to remain unchanged or even tighten in coming months, to prevent more speculative funds flowing into the property industry," Zhu Jianfang said.

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