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China economy faces risk of hard landing: Shi Xiaomin, govt economist
BEIJING: A property sector downturn and slumping global demand may knock China's economy into a hard landing in 2012, a senior government economist told Reuters, putting more pressure on Beijing to speed up economic reforms and to open up the market.
The economy is not just slowing but is also haunted by over-investment that could constrain Beijing's options, said Shi Xiaomin, vice president of China Society of Economic Reform (CSER), a Beijing-based think-tank.
"A hard landing of the economy is possible this year as slackening domestic and external demand pushes (full-year) GDP growth below 8 per cent, probably even to 6-7 per cent," said Shi.
"More worrying is that such a slowdown is going hand in hand with a sharp decline in the overall economic efficiency."
The world's second-largest economy may even slip into a period of deflation late this year or next year, he added.
Shi is an adviser to the government, specialising in reform. His think-tank is under the under the National Development and Reform Commission, China's top economic planner.
Fears of a hard landing in China have gained traction as a stream of recent data, especially disappointing trade and credit data in January showed the turbo-charged economy is faltering.
China's manufacturing sector contracted in February for the fourth straight month as new export orders dropped sharply in the face of the euro area debt crisis, the HSBC flash purchasing managers index showed on Wednesday.
Shi's outlook is a contrarian one in China. Most government economists don't expect a hard landing, which in the Chinese context is typically defined as a sudden dip in quarterly GDP growth below 8 per cent, which could lead to big job losses that pose a threat to social stability.
US economist Nouriel Roubini has flagged risks of a China hard landing after 2013, mainly due to over-investment.
China's leader-in-waiting Xi Jinping said during a visit to the United States last week that China's economic momentum would not falter as some economists have predicted, and said the economy faces no risk of a hard landing.
The last time the economy showed signs of a sudden slump, during the depths of the global financial crisis in 2008/09, Beijing announced a 4 trillion yuan ($635 billion) stimulus plan that helped it quickly return to double-digit growth.
But the huge pump-priming sparked unfettered bank lending to local governments, resulting in piles of debt -- officially estimated at 10.7 trillion yuan -- that analysts fear could destabilise the economy.
China's property sector has begun to cool, with housing sales in some cities falling sharply as Beijing's heavy-handed tightening measures unveiled since 2009 start to bite.
But Shi warned that a downturn in property investment, which accounts for an eighth of gross domestic product (GDP), as shrinking land sales hit local government revenues, possibly forcing them to default on loans.
China's banking regulator has issued guidance to banks to roll over some of their loans made to local governments to ward off a potential wave of defaults.
China cut banks' required reserves on Saturday to support the economy that is widely expected to slowing this quarter for a fifth consecutive quarter. The market consensus is for full-year 2012 growth to have slipped to 8-9 per cent.
"But monetary policy cannot solve structural problems," Shi said.
REFORMS STALLED China's reforms were launched by former leader Deng Xiaoping in 1978 and gained steam after China's entry into the World Trade Organisation in 2001, propelling the country's break-neck growth in the past three decades, Shi said.
China economy faces risk of hard landing: Shi Xiaomin, govt economist - The Economic Times
BEIJING: A property sector downturn and slumping global demand may knock China's economy into a hard landing in 2012, a senior government economist told Reuters, putting more pressure on Beijing to speed up economic reforms and to open up the market.
The economy is not just slowing but is also haunted by over-investment that could constrain Beijing's options, said Shi Xiaomin, vice president of China Society of Economic Reform (CSER), a Beijing-based think-tank.
"A hard landing of the economy is possible this year as slackening domestic and external demand pushes (full-year) GDP growth below 8 per cent, probably even to 6-7 per cent," said Shi.
"More worrying is that such a slowdown is going hand in hand with a sharp decline in the overall economic efficiency."
The world's second-largest economy may even slip into a period of deflation late this year or next year, he added.
Shi is an adviser to the government, specialising in reform. His think-tank is under the under the National Development and Reform Commission, China's top economic planner.
Fears of a hard landing in China have gained traction as a stream of recent data, especially disappointing trade and credit data in January showed the turbo-charged economy is faltering.
China's manufacturing sector contracted in February for the fourth straight month as new export orders dropped sharply in the face of the euro area debt crisis, the HSBC flash purchasing managers index showed on Wednesday.
Shi's outlook is a contrarian one in China. Most government economists don't expect a hard landing, which in the Chinese context is typically defined as a sudden dip in quarterly GDP growth below 8 per cent, which could lead to big job losses that pose a threat to social stability.
US economist Nouriel Roubini has flagged risks of a China hard landing after 2013, mainly due to over-investment.
China's leader-in-waiting Xi Jinping said during a visit to the United States last week that China's economic momentum would not falter as some economists have predicted, and said the economy faces no risk of a hard landing.
The last time the economy showed signs of a sudden slump, during the depths of the global financial crisis in 2008/09, Beijing announced a 4 trillion yuan ($635 billion) stimulus plan that helped it quickly return to double-digit growth.
But the huge pump-priming sparked unfettered bank lending to local governments, resulting in piles of debt -- officially estimated at 10.7 trillion yuan -- that analysts fear could destabilise the economy.
China's property sector has begun to cool, with housing sales in some cities falling sharply as Beijing's heavy-handed tightening measures unveiled since 2009 start to bite.
But Shi warned that a downturn in property investment, which accounts for an eighth of gross domestic product (GDP), as shrinking land sales hit local government revenues, possibly forcing them to default on loans.
China's banking regulator has issued guidance to banks to roll over some of their loans made to local governments to ward off a potential wave of defaults.
China cut banks' required reserves on Saturday to support the economy that is widely expected to slowing this quarter for a fifth consecutive quarter. The market consensus is for full-year 2012 growth to have slipped to 8-9 per cent.
"But monetary policy cannot solve structural problems," Shi said.
REFORMS STALLED China's reforms were launched by former leader Deng Xiaoping in 1978 and gained steam after China's entry into the World Trade Organisation in 2001, propelling the country's break-neck growth in the past three decades, Shi said.
China economy faces risk of hard landing: Shi Xiaomin, govt economist - The Economic Times
