A series of stabilizing policies introduced by the central government has gradually taken effect and the Chinese economy is recovering stably. The stimulus policies adopted by many countries in 2013 pushed the global economy to a slow recovery and the international economic environment is improving. Thanks to the central government’s stabilization policies, Chinese enterprises have accelerated production to make up the inventory rather than slowing down production to digest the inventory. The macroeconomic operation will continue the rising trend and China’s GDP growth in 2013 may be faster than 2012.
The demand for investment will continue to rise and fall. Over a certain period of time, the fixed-asset investment will maintain a growth faster than 20 percent and investment will remain the important force driving economic growth. In the first half of this year, China will continue to boost economic recovery with investment in large-scale infrastructure projects.
There are three reasons for this. First, the demand for infrastructure is robust. Second, 2013 is an important interim evaluation year for the 12th Five-Year Plan (2011-2015) and local governments will have new heads elected. Third, the loose financing environment will provide fund guarantees for investment in infrastructure construction projects.
Affected by the upgrading of the industrial structure, energy saving efforts and the macro-control polices issued by the State Council to curb rising house prices, the investment in manufacturing industries will drop slightly and investment growth in the real estate sector will slow down.
The primary driving force for the growth of consumption demand is constantly growing. Income is the most important factor deciding consumption growth. The fast growth of incomes will support a steady growth in consumption.
There are some factors driving consumption growth: First, the good incomes and employment situation of urban and suburban residents will support the steady growth of consumption. The employed population increased by 11.88 million in 2012 and resident’s real incomes in urban and rural areas grew by 9.6 percent and 10.7 percent respectively, higher than the GDP growth in China for the first time. It is expected that the central government will push forward comprehensive income distribution reform from many aspects, such as the primary distribution, redistribution, the growth of farmers’ incomes and distribution order. As this crucial reform is gradually carried out, China’s domestic consumption will gain more forward momentum.
The fast development of online consumption, community consumption and some other new consumption models will provide new powers driving China’s consumption. As China’s per capita GDP exceeded $6,000, China’s consumption structure entered an important period of upgrading and the consumption in cities is striding into the stage of “enjoying life” and rural consumption is entering the stage that features higher demand for living and traveling. The core drivers of consumption growth are the steadily growing demand for cars, medium and high-level household appliances and better services.
The gloomy prospects for exports, which are the result of the many global uncertainties and the slow recovery of the global economy, will be both favorable and adverse for the China’s foreign trade. The growth in China’s exports and imports in the first quarter of 2013 are expected to hit 8 percent and 6 percent.
The favorable factors include, first the strengthening signs that the global economic recovery is conducive to the steady operation of China’s export trade. The Purchasing Managers’ Index, a global measure of manufacturing, rose from 49.6 percent to 50.2 percent in Dec 2012, passing the “vicissitude line”. The real estate market of the United States just saw its largest restorative growth since 2006 and the unemployment rate in the US declined to 7.8 percent. The deficits of some European counties are becoming smaller. And the economies in Greece and Spain are recovering slightly. The MIST countries (Mexico, Indonesia, South Korea and Turkey) and some small emerging economies’ growths are accelerating. The warming of the world economy will improve the foreign demands for China’s export in the first quarter. Second, the optimization of trade structures will continue. China’s export growth will be higher than the world’s average, China’s share in the world market enjoys great potential for expansion as China is trying to upgrade the production structure of its exports .
The adverse factors are as follows: First the pressure of exchange rate appreciation is big. The developed countries apply quantitative easing monetary policies forcing the yen and US dollar to depreciate fast. The renminbi’s appreciation against the yen lowered the real growth of China’s exports by about 2 percentage points. The US economy is recovering and its imports are rapidly growing and so its trade deficit is increasing. The US dollar will depreciate. The real effective exchange rate of the renminbi will appreciate, which will weaken the price competitiveness of China’s exported products and add pressure to the growth of China’s exports. Second, China will come across some obstacles on its way to joining the world multilateral trade system. After the financial crisis, all countries paid more attention to grabbing international market share. The US and European countries all made policies supporting exports and to contain the exports of China and the other emerging economies by introducing protectionist measures and building up trade alliances, which goes against the growth in demand for China’s exports.
Last but not least, the price level growth trend is for a mild rise. China’s domestic economy is warming up. The pressure of cost-pushed inflation is building up. The liquidity of the international currency market is becoming looser and the prices of staple commodities are recovering. Under such circumstances, the price of consumer goods will show a rising trend. The Consumer Price Index is expected to rise about 3 percent in the first quarter of this year, higher than the fourth quarter of last year, but lower than the same period of time last year.
Qi Jingmei is a researcher with the State Information Center.