Economy will continue to decline: Bank

Economist blames Soft internal and external demand

Bank of Communications, China's leading commercial bank, released its projections on July 22 for China's economy in the second half of 2013, predicting gross domestic product growth of around 7.5 percent by the end of the year.

Lian Ping, chief economist at BOCOM, says China's economy still faces downward pressure because of sluggish domestic and foreign demand and economic structural imbalance.

In the second quarter, the performance of the manufacturing sector was sluggish and fixed asset investment was ebbing at a low level.

The expansion in real estate and infrastructure took up financial resources that could have been invested in other industries that would shore up the economy's real growth.

The government has shown determination to push forward with economic restructuring and reforms. It will take time to produce any noticeable results. Therefore, the Chinese economy is not going to grow at the high rate that people have been used to and will face downward pressure in the second half of 2013, says Lian.

Because of ongoing weak demand overseas, Chinese exports will grow at about 8 percent, similar to the year-on-year growth in 2012, according to BOCOM's report.

Supported by real estate and infrastructure construction, but dragged down by manufacturing, fixed-asset investment will grow by 20.4 percent, slightly lower than last year. Domestic consumption will expand by 11.9 percent, also lower than 2012, as people's incomes increase of a slow pace.

In spite of the slowdown factors, the Chinese economy is unlikely to have a "hard landing", says Lian. The government has promised to pursue moderate stimulation measures to keep the GDP growth above the bottom line, he says.

BOCOM predicts the third and fourth quarter growth rates will be 7.4 and 7.2 percent respectively and the yearly growth rate will be around 7.5 percent.

Consumer prices are going to increase slightly from the first half of this year. Pork prices are set to edge up as demand increases.

Water and power prices will also increase as the price reform deepens. Also, wages for migrant workers are increasing, pushing product and service prices up.

Housing prices are still likely to increase in the latter half of 2013, particularly in first- and second-tier cities, according to the report.

The real estate companies maintain sufficient financial capacity and demand is increasing at the same time.

Foreign exchange reserves will increase by a small margin, about 2 trillion yuan ($326 billion; 267 billion euros), as the United States gradually pulls out of its quantitative easing program and because of the Chinese government's strong crackdown on fraudulent trade, says the report.

yangziman@chinadaily.com.cn

(China Daily Africa Weekly 07/26/2013 page23)