Building Brics: China's economy could grow more than 8 per cent this year, giving some underpinning to global economic activity that is set for a mild, tortuous recovery.
Forecast of 8% growth for Chinese economy
China's economy could grow more than 8 per cent this year, giving some underpinning to global economic activity that is set for a mild, tortuous recovery this year, the head of China's sovereign wealth fund said yesterday.
"China's economic growth could be over 8 per cent this year. China's economy supports a very large part of global demand," Lou Jiwei, the chairman of the China Investment Corporation, told a forum in Beijing.
China's economy expanded at an annual rate of 7.9 per cent in the fourth quarter of last year, snapping seven consecutive quarters of weaker growth, as a series of pro-growth policies kicked in.
The bounce helped to lift full-year growth in the world's second-biggest economy to 7.8 per cent, which, although China's slowest pace for 13 years, generated about a third of global economic growth of 3.2 per cent - itself the worst since the 2008-2009 financial crisis and just barely above the 3 per cent mark economists say signals a worldwide recession.
Mr Lou said that even if China's growth did accelerate further this year, increased financial market volatility caused by Europe's debt crisis and concerns about the fiscal position of the United States, left the world economy set for a "mild, tortuous and slow recovery" at best.
Problems in debt-constrained countries, however, meant opportunities for cash-rich China, said Mr Lou, adding that the government should encourage local firms to step up their efforts to expand and invest abroad.
"There are big opportunities for countries with cash on their hands, especially for China. We should grasp the opportunities and give firms more freedom in investing overseas," he said.
China has accumulated the world's largest stockpile of foreign reserves, some $3.31 trillion (Dh12.15 trillion) at the end of last year, generated largely as a function of capital controls that have forced Chinese exporters to sell foreign currency to the central bank.
Easing capital controls to let firms more readily use export earnings to buy overseas assets would please many executives who say strict rules and a lengthy approval process for outbound investments are big impediments to doing cross-border deals.
Despite the difficulties, Chinese non-financial outbound foreign direct investment hit a record $14.7bn last month, taking last year's total to $77.2bn from 2011's $60.1bn, commerce ministry data shows. Beijing targets a total of $560bn in outbound foreign direct investment in the five years to the end of 2015.
Zeng Peiyan, a former vice premier, told the same forum that China's leaders must have "political courage" to quicken economic reforms to help sustain growth.
Mr Zeng, now the chairman of the top Beijing think tank, the China Centre for International Economic Exchanges, said the Chinese economy was "shifting gear" and clearly decelerating from the double-digit average growth rates of the past three decades to 7 to 8 per cent in the foreseeable future.
Chen Xiwen, the deputy director of the office of the Central Financial Work Leading Group, a powerful body that charts key government economic policies, said China's growth strategy should focus on improving urbanisation in its next stage of development.
Mr Chen, who also heads the ruling Communist Party's office on rural policy, said China's actual urbanisation rate is about 35 per cent - lower than the official rate of 51 per cent.
"In other words there are some 200 million [rural] people who have entered cities, but have not yet become urban residents. This is a big problem that we need to deal with in the future urbanisation process," he said.
China's rigid household registration, or hukou, rules are regarded by many analysts as China's most pressing reform item as a change there would address inequality and boost domestic demand, rebalancing the core growth drivers of the economy.
A newly recalibrated official index this month indicated China's gap between rich and poor was so wide that serious social dissatisfaction may be brewing.