Steady growth for GDP as structural reform proceeds

Updated 2016-11-28 12:43:20 Global Times

Weak exports, property market uncertainty cloud outlook

Economic growth in China will improve steadily in 2017, and the country will deepen reforms to tackle remaining challenges, experts said.

Economic indicators for the first three quarters of 2016 support the view that China can meet this year's GDP growth target of 6.7 percent, said Tian Yun, director of the China Society of Macroeconomics Research Center.

Tian told the Global Times on Wednesday that the rise in the Producer Price Index (PPI) in September was a promising sign that the country's industrial deflation had ended.

The PPI, which measures the cost of goods at the factory gate, ended 54 months of decline in September, the National Bureau of Statistics (NBS) announced on October 14.

Efforts to help domestic companies deleverage have also made progress, Tian said.

Given current economic conditions, GDP growth will range from 6.5 percent to 6.7 percent in 2017, he said.

Liu Xuezhi, a senior analyst at Bank of Communications, said the economy is approaching an inflection point, so economic growth in 2017 won't slow as it did in previous years although a rapid recovery is also unlikely. "[The economy] will advance steadily," he told the Global Times. He forecast GDP growth of 6.6 percent or 6.7 percent in 2017.

Experts said rising infrastructure spending will drive economic growth next year. China's investment in infrastructure rose 19.4 percent year-on-year to 9.5 trillion yuan (.37 trillion) in the first 10 months in 2016, the NBS said on November 14.

"Infrastructure investment can contribute to economic growth only if the investment translates into things that people use. If not, it just contributes to excess capacity," Tian said.

The services sector will play a vital role in China's economy in 2017, Liu said.

Added value in the services sector grew 7.6 percent in the third quarter. The services sector contributed about 58.5 percent of China's GDP growth in the first three quarters, according a report released on Friday by CMB International, a wholly owned subsidiary of China Merchants Bank.

Other industries such as advanced equipment manufacturing and high technology will help drive economic growth in 2017, Liu said, as will e-commerce.

However, experts warned about such factors as sluggish exports and the uncertain outlook for property.

In the first 10 months of 2016, exports declined 7.7 percent while imports fell 7.5 percent, the General Administration of Customs announced on November 8.

"We'll know that the economy has hit bottom only when China's exports are flat and then edge up," Tian said, noting that "the growth must last one or two quarters, not just one month."

Recent home-buying restrictions have cooled the property market, said Yan Yuejin, research director at the E-house China R&D Institute. That will allow capital to flow into sectors such as infrastructure, which will boost economic development, Yan told the Global Times on Sunday.

The property market may cool a bit next year but it won't plunge, he said, noting that "housing inventories will be further reduced nationwide."

To achieve medium- to high-speed growth, China is likely to deepen supply-side reforms and do more to cut industrial overcapacity, experts said.

The government is expected to adopt a prudent monetary policy to counter potential risks in the domestic and international markets, such as currency fluctuations and capital outflows, Liu noted.

The yuan will remain under downward pressure in 2017, but that will be controllable and long-term depreciation is unlikely, experts said.

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