China's economy may cool, hard landing ruled out

Updated: 2011-11-22 10:15


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BEIJING - China's economic expansion may further slow down amid heightening strain in debt-ridden Europe and lingering concerns over the US economy, but the country is not going to have a hard landing -- at least not soon.

Hurt by a slowdown in external demand and a liquidity crunch under monetary tightening, the country's economy has slowed to its weakest pace in two years and is likely to continue on the cooling trend.

A report released by Beijing-based Renmin University of China (RUC) forecast that China's economic growth will ease to 9.4 percent this year before further slipping to 9.2 percent in 2012.

However, even with that figure, the country still outperforms other major economies and stays in shape.

The country's economic fundamentals will remain good in 2012, Wang Yiming, deputy head of the Academy of Macroeconomic Research under the country's top economic planner, the National Development and Reform Commission, said at a forum held by Xinhua News Agency last weekend.

His comment was echoed by other economists.

Despite some cooling, it is generally believed that the world's second largest economy will not slide into recession, as domestic consumption is gaining strength and the government stands ready to fine-tune policies.

The biggest risk facing China next year will come from the external environment, especially the debt crisis in Europe. But the government has been keenly aware of this, Wang said.

"When mapping out guidelines for the 12th Five-Year Plan, central authorities decided the main task in the coming one or two years would still be combating the spill-over of the global financial crisis," he said. "They made the right judgement."

"When talking about China's economy, one should never overlook the government's leading and irreplaceable role," said Gao Peiyong, an economics professor with the Chinese Academy of Social Sciences (CASS).

In China, the government's macro-control intent will often translate into real economic outcomes, Gao said.

As consumer prices eased for a third consecutive month, and global headwinds continue to blow from the eurozone crisis and the United States, China's macro-control should make some timely adjustments to keep up with the changes, said Li Yang, vice president of the CASS.

The government now should strike a balance between curbing inflation and maintaining economic growth, he said.

Apart from external uncertainties, the sizzling domestic housing market has been deemed another major trigger for China's hard landing.

According to Liu Yuanchun, deputy head of the School of Economics at RUC, local governments, whose finances have relied heavily on land sales, could not bear more than a 20 percent dip in housing prices, while the macro-economy is unable to take drops of over 25 percent.

He predicted the government will finally loosen control over the real estate sector in the third quarter next year.

The central government should seek a soft landing for the property market, said Li Daokui, an advisor to the monetary policy committee of the central bank.

A hard landing in the real estate market, as in the United States and some European countries, will lead to a series of social and economic problems, the advisor said.

As China's economy continues growing vigorously, it will take three years to defuse pressure related to the overheating housing market, he added.

China's GDP slowed to 9.1 percent in the third quarter of this year, down from 9.5 percent in the second quarter and 9.7 percent in the first quarter.