Reform-minded Xi may retard growth in 2013HONG KONG - China’s economy is likely to lose more steam next year as the new leadership is poised to push for greater reforms, a report said yesterday.
Samsung Securities predicted that the world’s second-largest economy will see GDP growth slip to 7.4 percent in 2013 from this year’s estimated 7.6 percent expansion.
China’s quarterly GDP growth will fare better in the first half of 2013 on inventory-cycle factors but slow in the second half on policy reform and provincial government debt restructuring, the Korean brokerage said.
“It will be difficult for China to maintain a growth strategy based on exports and fixed-asset investment,” said Juhn Chong-kyu, a strategist at Samsung Securities. “To achieve a long-term growth target of around 7 percent, authorities will need to focus on a private-consumption-driven economy, find new growth drivers and enhance economic efficiency.”
China’s fifth generation of leaders, headed by Xi Jinping, is set to officially take the reins in early 2013, marking the third leadership change since large-scale economic reforms were introduced in 1978.
The new administration is tasked with weathering a structural economic crisis and achieving the country’s goal of reaching great-power status over the next decade, Samsung Securities said, adding that structural reform will be a key buzzword for the Chinese economy in 2013.
“The next three to five years will be critical in that they will determine whether China can preemptively deal with an economic crisis or will plunge into a destructive economic disaster. While Chinese government policy has centered on stability in 2012, change and restructuring will be key next year,” said Juhn.
With growth now losing momentum for the first time since 1978, when the country opened up its economy, China now needs to establish a medium- to long-term growth strategy and put its industries through a structural overhaul, the brokerage said.
China’s economic growth has been decelerating amid the euro zone debt crisis and other global uncertainties.
Its GDP grew 7.4 percent on-year in the July-September period, slowing from a 9.1 percent increase during the same period a year earlier.
The figure also compares with a 7.6 percent on-year expansion in the second quarter and 8.1 percent growth in the first three months.
Restructuring of provincial government debt should be the primary target, while industry restructuring will likely stay on the back burner, Samsung Securities said.