More government 'signals and solutions' needed

Standard Chartered research head says economy lacks stimulation to maintain 8 percent growth

The Chinese business community needs more positive economic signals and practical solutions from structural reform handlers to help maintain 8 percent growth this year, according to a senior official at Standard Chartered PLC.

Stephen Green, head of Greater China research at Standard Chartered in Hong Kong, predicted it will be difficult for China to reach that 8 percent GDP growth in the first half, considering the sluggish industrial production situation and weak consumption.

"But we expect faster expansion in the third and fourth quarters," he added. Standard Chartered is expected to lower its whole-year growth prediction from the current 8.3 percent this week, and a "range between 7.5 percent and 8 percent is possible", Green added.

China's growth slowed in the first quarter to 7.7 percent from 7.9 percent in the last quarter in 2012. The annual growth was 7.8 percent last year, the lowest level since 1999.

"In the short term, China lacks new stimulation to achieve faster expansion, unless policy makers can release reform details," added Green.

Premier Li Keqiang hosted a State Council meeting on Monday to unveil this year's economic reform agenda. He highlighted nine priorities including fiscal, financial, resource pricing and quality urbanization.

A State Council statement said that China will further open the capital account and allow individual investors to use overseas securities markets; reform the budget system and improve risk management of local government debt; and reform the household registration system to promote a quality urbanization.

Huang Yiping, chief Chinese economist with Barclays Capital, called the measures "a step forward". "We think the carefully chosen content, wording, and ordering of the reforms suggest the new government is fully aware of public discontent, understands the urgency and priority of much-needed reforms, and plans to push forward in a pragmatic manner," Huang said.

However, Green said he thought the plans still represented top-level design, and it will take time to see more specific measures being announced to implement what could be a complicated reform timetable.

"If detailed plans cannot be seen by the end of this year, it will be so disappointing and most overseas investors may lose confidence in the economic outlook," Green added.

He said based on the State Council's statement, it seems that Chinese leaders are more focused on a long-term growth model, rather that rapid growth in the short-term.

"As the employment situation is stable, no more simulative policies are likely," he added.

Standard Chartered is predicting that monetary policy will remain robust and it is unlikely the central bank will alter interest rates in the second half because inflation is not an issue this year.

The National Bureau of Statistics plans to report April's consumer and industrial inflation figures on Thursday.

A research note from Barclays Capital has forecast that April inflation may ease slightly to 2 percent from March's 2.1 percent because of falling pork and poultry prices.

Tang Jianwei, an economist with the Bank of Communications, said that this year's overall consumer price index, a main gauge of inflation, may drop to 2.8 percent, considerably lower than his previous expectation of 3.5 percent, against last year's 2.6 percent.

Barclays Capital also said that year-on-year industrial production growth in April may accelerate to 9.6 percent compared with 8.9 percent in March, after the leading indicator of manufacturing, the purchasing managers' index, reflected stable output.

It said fixed-asset investment may have increased by 20.7 percent last month, from 20.9 percent in March, "with infrastructure investment growth offsetting some further slowdown in property investment growth".