BEIJING, April 11 (Xinhua) — China’s economic growth is set to moderate slightly over the next two years but will exceed 8 percent, on the back of strong investment, rising private consumption and a more stable global economy, the Asian Development Bank (ABD) said Wednesday.
In its annual economic report released at a press conference in Beijing, Paul J. Heytens, ADB country director for China, said China’s GDP growth in 2012 is forecast at 8.5 percent, with the priority of macro policy expected to shift from fighting inflation to stabilizing growth.
Supported by stronger global growth momentum, China’s economy is likely to expand by 8.7 percent in 2013, according to the ADB report.
“The global environment remains very uncertain but China is showing healthy signs of economic diversification with domestic consumption up and the trade surplus down,” said ADB Chief Economist Changyong Rhee.
The ADB expects China’s exports and imports to increase by around 15 percent and 18 percent in 2012, respectively. The contribution of net exports to GDP growth is projected to remain negative, and the trade surplus will continue narrowing, it said.
China is aiming to increase the volume of total exports and imports by around 10 percent year-on-year in 2012, a sharp slowdown from last year when its imports and exports rose 22.5 percent year-on-year to 3.64 trillion U.S. dollars.
Nominal private consumption is expected to grow by almost 12 percent in both 2012 and 2013, boosted by continued employment and wage growth as well as increased government social expenditure, according to the report.
China’s economy expanded by 9.2 percent in 2011 to 47.16 trillion yuan (about 7.49 trillion U.S. dollars) from a year earlier, when it grew 10.4 percent.
The ADB forecasted that China’s inflation will decline to about 4 percent in the next two years, as pressure from imported inflation would ease and continued policy restraint on property markets will help control domestic inflation pressures.
But there are still inflation risks, said the report, including bad weather, rising labor costs and possible increases in energy and utility prices.
China’s fiscal policy is expected to remain broadly expansionary, with higher spending on social security programs like education, health care, pensions and public housing, said the ADB. The overall fiscal deficit is expected to cover 1.7 percent of GDP in 2012 and 2 percent in 2013.
The ADB said the Chinese government may carry out further fiscal and financial reforms to ease the tax burden on consumers and small and medium-sized enterprises.
According to the report, fixed asset investment will remain China’s major engine of growth, increasing by 20 percent or more in 2012 and 2013. Investment in infrastructure is expected to continue at a high level.
China’s ambitious plan of building 7 million housing units in 2012 will partly offset the slowdown in real estate investment by the private sector, the bank expects.
The ADB said the main risks for China would be uncertainty over external demand among the country’s largest trading partners, and potential increases in non-performing loans of local government.
But the report pointed out that progress in diversifying export markets and re-balancing sources of growth toward domestic demand should help maintain economic momentum, and that the country’s financial sector is sound overall.
The ADB also warned of sharply widened income inequality in the region, which will hinder future growth as it undermines consumption, constrains development in poorer regions, and generates social tensions.
Income redistribution and social security thus need to be strengthened for inclusive and sustainable growth. A much more unified social security system is required to address needs arising from increased labor mobility, the challenges of accelerated urbanization and the implications of a rapidly aging population, said the bank.