Uncertainties cloud China's economy in 2012

Updated: 2012-01-17 07:04


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BEIJING - A slowdown is expected for China's growth engine in 2012 as uncertainties continue to cast clouds over the world's second largest economy amid festering European debt woes and painstaking macro-control policies.

The country's release of economic data for the fourth quarter of 2011 will take the spotlight on Tuesday, with many analysts expecting economic growth below 9 percent, the slowest in 10 quarters.

A slowing Chinese economy is inevitable due to weaker exports and fixed-asset investment, said Lu Zhongyuan, deputy director of the Development Research Center (DRC) of the State Council, or China's Cabinet.

"We should no longer be obsessed with the speed of growth," said Lu, who predicted the expansion of China's gross domestic product (GDP) would decelerate to around 8.5 percent in 2012.

While short-term demand shrinks, China's mid-and long-term growth potential will decrease because of factors such as an aging population, rising labor costs and less room for infrastructure improvement, said Yu Bin, director of the DRC's Macroeconomic Research Department.

Yu also estimated the 2012 GDP growth will slow to around 8.5 percent, based on an overall stable domestic property market and barring another global financial crisis.


The direction of the European sovereign debt crisis has been closely followed by Chinese authorities, as the European Union is the country's largest trade partner.

The outlook for exports, one of the three main drivers of China's growth, is "very worrisome," said Yao Jingyuan, former chief economist with the National Bureau of Statistics (NBS).

Zhang Xiaoqiang, deputy director of the National Development and Reform Commission (NDRC), said China targets about 10-percent annual growth in its foreign trade in 2012, significantly slower than in 2011.

Compared with January, 2011, year-on-year export growth in December was down by 24.2 percentage points to 13.4 percent and import growth fell by 39.8 percentage points to 11.8 percent, customs data show.

However, Fan Gang, a former advisor for China's central bank, said the export outlook may be better than expected, anticipating no real recession in the European economy in 2012.

Moreover, with a narrowing trade deficit, the pressure for allowing the appreciation of the Chinese currency will lessen in the first half of the year, playing a positive role in stabilizing export growth, Fan said.

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