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Slowing GDP growth in China triggers a new focus
- Slower growth (8.9 per cent fourth quarter), Chinese economists noted this week, reflected the
beginning of a difficult rebalancing that the economy needs, to move growth away from the export-dependent, GDP-focussed approach that has defined China's rise over the past two decades.- Single-digit growth, once viewed as dire by China's economic planners, has now become the objective of planners
- Chinese leaders have, over the past decade, fixed 8 per cent as the minimum growth target to ensure job creation and social stability.
- One source of optimism for the Chinese economy, highlighted by economists here on Thursday, was the urbanisation rate, which exceeded 50 per cent last year
- The government has set the annual growth target for the next five-year plan (2011-15) at 7 per cent, down from the 11.2 per cent average in the previous five-year period.
- China's economy grew 9.2 per cent last year, down from 10.3 per cent in 2010.
- An even lower 8.5 per cent is the forecast for 2012, a key year for China as it embarks on a once-in-a-decade leadership transition.
- Real estate investment, which has been a key driver of growth, fell in December
- This followed the introduction of new property taxes and curbs on buying second homes.
- “It's vital to boost investment by non-property companies and raise people's incomes. Income distribution reform will not be easy, but it is a must for China's future growth.”
- Now the challenge is mounting local government debt, a legacy of a $586 billion stimulus plan, including investments in major infrastructure projects and massive lending, unveiled to counter the financial crisis.
- Three million yuan, or $476 billion is a conservative estimate by economists of bad loans.
- a sharp decline in foreign direct investment, down 12.7 per cent year-on-year in December.
UN predicts 7.7 % growth in India
- A United Nations report (‘World Economic Situation and Prospects 2012') on global economic prospects has projected India's economy to grow at a pace a tad lower than 8 per cent in 2012 and 2013 (7.7 per cent in 2012 and 7.9 per cent in 2013) in view of the sharp increase in downside risks stemming from the problems in Europe and the U.S.
- For the current fiscal, even as the official estimate for GDP (gross domestic product) growth stands scaled down to 7 per cent from the earlier projection of 8.5 per cent
- The UN report, while noting that South Asia's economies — India, Pakistan, Nepal, Iran, Bangladesh and Sri Lanka — are expected to grow by 6.7 per cent in 2012 and 6.9 per cent in 2013, accelerating slightly from 6.5 per cent in 2011, seeks to apportion blame on India's economic situation for a low regional average.
- Double-dip recessions in Europe and the U.S. would have a significant impact on economic activity across South Asia, UN economists say, as Europe and the U.S. are key export markets for South Asia and a main source of tourism revenues.
- As per its outlook forecast, “inflation is projected to decline slowly, averaging 9.1 per cent in 2012 and 8.0 per cent in 2013, as food and commodity prices ease and the impact of monetary policy tightening is felt in Bangladesh and India.
- Noting that the country's fiscal deficit declined to 5.1 per cent of GDP in 2010-11 as economic growth boosted tax revenues and the sale of 3G telecommunications licences increased non-tax revenues, it said: “But India's government is unlikely to reach its deficit target of 4.7 per cent of GDP for 2011-12, as lower growth brings down tax revenues, and disinvestment in state-run companies is put on hold.”
