Top scholar predicts economic growth above 8%

Reform Foundation chief says nation has had its soft landing and has entered period of moderate growth

China's economy has already had its soft landing, and is expected to grow by more than 8 percent this year, a top think tank scholar said on Thursday.

Fan Gang, chairman of China Reform Foundation, said the worst time had occurred in the second and third quarters of 2012, and after which China has entered a new round of moderate growth.

"There was overcapacity, but the bubble in the economy is not too large. What we are experiencing now should be considered as a soft landing," he said.

Fan said the economy has become stable, and will experience a recovery this year, reaching 8 percent growth.

China's economic growth in 2012 could be 7.7 percent, a senior official from the National Development and Reform Commission, China's top economic planning agency, estimated last week.

Speaking on monetary and fiscal issues in 2013, Fan forecasted a return to "moderate" policies, meaning spending should be as big as is needed, without the use of stimulus or curbs.

The central government set the tone for macroeconomic policy in 2013 - steady monetary policy and proactive fiscal policy - at last month's Central Economic Work Conference. It was reported that China's fiscal deficit will expand to 1.2 trillion yuan ($193 billion) in 2013, a 50 percent increase from 2012.

Fan said the government should divert its attention from short-term economic growth to medium- and long-term structural reform in 2013, such as opening up the market to private investment and adopting structural tax reductions.

He Fan, deputy director of the Institute of World Economics and Politics under the Chinese Academy of Social Sciences, also said the government's priority should now be on structural reform.

"Of course, infrastructure investment will still grow rapidly, but more spending should be on education, healthcare and public service," He added.

"If you ask China's economists, they will say the situation now is quite optimistic; but if you ask China's entrepreneurs, they would say conditions couldn't be worse," He said.

A key solution for struggling enterprises, especially small and medium-sized enterprises, is to concentrate on niche markets and upgrading their competitiveness, he added, a sentiment echoed by Fan, who said SMEs should also refrain from expanding too recklessly, and concentrate on their own strengths.

The massive stimulus packages introduced during the financial crisis of 2008-09 resulted in excess liquidity in China, and many of the country's enterprises expanded their business into other industries. An oversupply of funds and production overcapacity in some areas have plagued them ever since.

"China's golden economic period has gone. Now enterprises have to face up to fiercer competition, and falling returns from investments, which is actually a more normal situation for many small businesses," He said.

zhengyangpeng@chinadaily.com.cn

(China Daily 01/18/2013 page14)