EC: China's economy to grow 8% in '13

The European Commission has forecast that China's economy will grow 8 percent this year and 8.1 percent in 2014, after it successfully avoided a "hard landing" in 2012.

According to its spring forecast released on Friday, EC officials said China remains exposed to a possible worsening of the international environment, but its principal risk factors remain domestic.

The report said the European Union economy is expected to stabilize in the first half of 2013, following recession in 2012.

The commission expects GDP growth in the EU to turn positive in the second half of the year before gaining momentum in 2014.

Projected GDP growth for the EU is minus 0.1 percent in 2013, and 1.4 percent in 2014, and 1.2 percent in the euro area — weak performances which the report attributed to constrained domestic demand due to a number of impediments, which are typical of the aftermath of deep financial crises.

It said the global average growth rate may climb to 3.8 percent from 3.0 percent in 2012.

However, the European economic pickup may not bring job creation. The jobless rate in the area is forecast to be the same in 2013 and 2014, as high as 11.1 percent. While the unemployment rate for the two years in the eurozone stands as high as around 12 percent.

"In view of the protracted recession, we must do whatever it takes to overcome the unemployment crisis in Europe," said Olli Rehn, the commission's vice-president for economic and monetary affairs and the euro.

On China, the report said that consumption is likely to remain the principal driver of growth in 2013. It said rising wages are likely to increase household incomes while real interest rates will remain positive, implying rising earnings on household deposits and an increase in financial wealth.

"Policy is likely to continue to be supportive for household income with a continuation of measures to broaden the social security net, as well as to support spending directly via measures to boost ‘green' consumption," the report added.

Officials said it is unlikely that the rapid growth in exports seen in early months of 2013 can be maintained in China, given the likely slow recovery in world trade, and the short-term prospects for the EU and the US, both major trading partners.

It said China's currency appreciation will not be helpful in increasing exports, a long-term driver of its rapidly growing economy, it added.

According to EC calculations, the real effective exchange rate of the renminbi has appreciated by around 5 percent over the last six months, which will act as a modest drag on export growth.

Pierre Defraigne, executive director of The Madariaga- College of Europe Foundation, a think-tank based in Brussels, said key global players such as China and the EU must maintain a close and direct dialogue over a vast array of important topics of common concern, starting with the grim global economic outlook.

Defraigne said both sides must provide a strong push to the economic and strategic cooperation between the EU and China, which are both confronted with huge reforms at home.

Those include the governance of the eurozone and the growth and jobs priority in Europe, and further progress toward economic growth, administrative effectiveness, and political accountability in China, it said.

"Bilateral cooperation, instead of protectionism in key areas such as energy, urbanization and telecommunications, should be strengthened quickly," said Defraigne.

Cheng Shican in Brussels contributed to this story