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A Roadmap for Change
Cover Stories Series 2012> A Roadmap for Change
UPDATED: December 24, 2012 NO. 52 DECEMBER 27, 2012
A Stable 2012, a Promising 2013
After achieving a soft landing in 2012, China's economy must focus on steady and quality growth rather than a high growth rate
By Lan Xinzhen

Li noted that China's economic growth in 2013 could be primarily driven by investments in the following fields.

First, more investment will be put in technical innovation and upgrading. The Central Government is likely to support key industries to carry out technical innovation by launching subsidies on interest rates, encouraging financial institutions to provide diversified financing facilities for related projects and backing enterprises to undergo technical transformation through a finance lease.

Second, the central budget could allocate more money to improve people's livelihood by boosting investment in subsistence allowances for low-income people and public services like education, social security, affordable housing and medical treatment. In 2013, the government will also formulate and unveil an array of new measures and policies to lower the threshold for investment in the service industry and direct private capital and production factors toward the improvement of people's livelihood.

Third, more funds could go to major transportation and urban infrastructure construction.

Fourth, more investment could be made in the construction of reasonably priced commercial housing to push forward urbanization and cope with exorbitant housing prices.

Zhang Hanya, a research fellow from the Investment Association of China, believes more positive factors will contribute to investment growth in 2013 because most of the related policies and measures launched in 2012 would produce delayed results in 2013.

Moreover, since 2013 falls in the middle of the 12th Five-Year Plan (2011-15) period, many projects, which are expected to be completed by 2015, like the construction of high-speed rail lines and expressways and the improvement of water conservation facilities, had to be financially supported before 2013.

Zhang holds that the investment environment will improve in 2013. Private investment accounted for 62 percent of total investment in the first half of 2012 and the ratio will only increase.

However, the global economy will be in a period of deep adjustment. Furthermore, domestic demand will face the risk of decrease and overall increase of price levels, resulting in a similar economic growth as seen in 2012.

On the alert

A study by the Academic Group of the Development Research Center at the State Council suggests the world economy is still in a post-crisis adjustment period, when effective restructuring has yet to take place and global momentum for real economic growth has yet to take shape.

China's economy is now in a key period of transformation. Driving forces for economic growth are changing, original competitive edges are weakening and new ones have just begun to form.

According to the report, the world will enter a new round of monetary easing in 2013. Nevertheless, downside risks to domestic demand still exist. With continued implementation of a pro-active fiscal and monetary policy, China should lay stress on combining demand with supply policies, accelerating restructuring, fostering new competitive edges and pushing forward the transformation of growth driving forces.

Some people are overly optimistic about China's economy in 2013, Yao said. Substantial progress hasn't been made in regard to restructuring the economy and transforming the country's modes of development, which will remain big problems in 2013. For these reasons, the focus should be on maintaining steady growth rather than blindly seeking a high growth rate.

"China should create a favorable environment for economic reforms. This way, a solid foundation can be laid for high-quality growth. Besides, the economy should not expand too fast," said Yao.

Chen Dongqi, Vice President of the Academy of Macroeconomic Research at the NDRC, says that although expectations of economic growth for 2013 are slightly better than that of 2012, two risks still linger. On the one hand, there are the ramifications of the U.S. failing to avoid the "fiscal cliff," the European sovereign debt crisis and the Japanese recession. On the other, the challenges many enterprises face have led to mass layoffs and reduced income expectations.

Email us at: lanxinzhen@bjreview.com

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