GDP growth may exceed official target
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E-mail Shanghai Daily, March 22, 2012
Editor's note: China's Premier Wen Jiabao this month cut China's economic growth outlook this year from a long-held 8 percent to 7.5 percent. The announcement has economists buzzing. Here's what some of them had to say.
We raise the expectation for China's economic growth this year to 8.6 percent from 8.3 percent, mainly due to three reasons.
(1) Our global team has raised its growth forecast for the US and Japan this year and sees China's PMI sub-index for new export orders rising. Those encourage us to raise China's export growth from 8 percent to 13 percent this year.
(2) Smaller businesses that account for 70 percent of employment in the industrial sectors are improving.
(3) The impact of the cooler property market on China's economy was not as serious as we used to think.
PMIs (which measure the activity of purchasing managers) in the US, Japan and Europe have been improving in recent months. Based on our experience, every 1.5 percentage point increase in the weighted average economic growth indices for the three countries will lead to a 5 percentage point increase in China's exports.
Our global team in February raised Japan's economic growth forecast from 0.7 percent to 2.5 percent, and for the US, from 2.4 percent to 2.7 percent. That will lift China's export growth by 4 to 5 percentage point this year.
Compared with the third quarter last year, the commercial environment for small businesses in China has improved significantly. They altogether account for more than 90 percent of industrial companies. Improved liquidity, easing price pressures on raw materials and a recovery of export orders drove the PMI index for smaller companies to a two-year high of 55.2 in February.
Besides, we expect regulatory extension for several hundred billion yuan of local government debt, which will indirectly improve liquidity for smaller businesses.
The correlation between the decline in the property market and the economy has been proven weaker than we previously thought. With a stable inventory in the industrial sector and the absence of any sharp slowdown in exports, the link between property controls and a manufacturing slowdown is weaker than the property slump of 2008.
Though growth in new residential construction in the last four months of 2011 eased 55 percent year on year, that slowdown will drag this year's gross domestic product down by less than 1 percentage point.
