China's economic landscape for the next year will no doubt feature more policies and regulations geared toward reducing the impact of the global economic crisis. Next year will mark the debut of China's 12th Five-Year Programe, which features many policies aimed at stabilizing China's economy. Although the country has seen explosive growth in recent years, there are still some uncertainties regarding China's economy; 2011 will prove to be a test for China's most recent policies. Below are comments from 10 economic experts about the outlook for China in 2011.
Teng Tai, Vice President and Chief Economist at Minsheng Securities: 2011 will be a year of "soft landings" for China's economy
"China's economy will realize a 'soft landing' in 2011," said Teng Tai. Slower rates of growth and inflation and the acceleration of China's economic transformation will be the three major characteristics of the Chinese economy in 2011, Teng said.
Teng predicted that China's GDP growth rate in 2011 will at least be 1 percentage point lower than that of 2010. Teng believes this will occur because of three factors: increasing inventories for Chinese companies, a loss of momentum in the fixed-asset investment market, and a drop in China's exports. However, this is not considered to be a significant problem. Fan Gang, a member of the Monetary Policy Committee of the People's Bank of China, said "a growth rate of 8 or 9 percent is more helpful for the sustainable and healthy growth of the Chinese economy."
Su Buchao, real estate industry commentator and General Manager of Wolong Media: Property prices will stabilize in 2011
Su Buchao said that people don't need to worry about an overheated property market in 2011. "Next year will see property prices staying at reasonable and stable levels. The market's highlights will include changes in consumption patterns and new areas of focus for speculators," Su said.
Su believes that property taxes will be a significant factor in the reduction of property prices. He also believes the soon-to-be-passed tax laws will exert enormous impact on the second-hand housing market. Prices for these homes might see significant drops next year as a result of the taxes.
Real estate "hot spots" will also change next year, according to Su. "As the result of new restrictions on real estate purchases, third- and fourth-tier cities around Beijing, such as Langfang and Chengde, will become new targets for investors," Su said.
Ding Yuan, Professor of accounting at the China Europe International Business School: The "A share" market will bring in handsome returns over the next three years
"Money always flows to areas with great growth potential," said Ding Yuan, referring to changes in China's investment environment. He predicts that there will be significant changes in investment portfolios next year, as new markets become popular. As one of the world's top emerging economies, the Chinese investment market has great potential for growth in 2011, according to Ding.
Ding also said that China's stock market will see modest growth in 2011. "It is unlikely that the Chinese stock market will see any dramatic growth, as it did in 2006 and 2007," Ding said. "When owners of industrial assets begin to purchase shares of their own companies, we can see that prices of these stocks eventually bottom out," said Ding.
The 2011 Economic Blue Book on China's Economy, released by the Chinese Academy of Social Sciences, also states that the Chinese stock market will be quite conservative in 2011. The paper predicts that the market will slowly and steadily increase in 2011, due to relatively tight economic policies put in place by the Chinese Government.
Chen Fengying, Director of the World Economy Institute of China's Institute of Contemporary International Relations: Energy prices should be dictated by the market, administrative interference should be phased out
China saw a nation-wide diesel shortage at the end of 2010, resulting in long queues at gas stations around the country. Energy providers have asked the government to allow them to raise their prices as a result of increasing coal prices. In the face of high inflation rates, the government has been prudent about adjusting energy prices.
However, Chen Fengying is still optimistic about China's energy market in 2011. "The energy supply risk is dropping," she said. She believes that demand for oil will actually decrease in 2011; China has been making stronger ties with oil-rich countries such as Russia and Brazil, allowing for a more stable market.
In addition to relying on traditional energy sources, China will also look at tapping new sources for energy in 2011. Nuclear and hydroelectric energy projects are part of China's 12th Five-Year Program, which will pour 5 trillion yuan ($746 billion) into these and other alternative energy projects.
Wang Jianmao, Professor of Economics at the China Europe International Business School: Annual consumer price index (CPI) growth will top 3 percent
"The current CPI growth rate target of 3 percent will be difficult to rein in over the next few years," said Wang Jianmao. Loose domestic monetary policies have resulted in excessive liquidity, causing prices to increase over the previous year. Government investment will edge out private investment in several areas, according to Wang.
The home prices saw an average increase of 23.5 percent in 2009, which will definitely push up the rents. The impending property taxes may curb the upward spiral of property prices to some extent, but would add momentum to the sharp rent rises.
New reforms targeting the prices of labor and capital will also occur in 2011, causing these previously underpriced resources to increase in cost.
Internationally, the exchange rate of the renminbi (RMB) against the U.S. dollar will keep rising as dollar depreciates. The best bet for U.S. monetary policy makers is to make the dollar depreciate while maintaining its dominant position. The United States might use its quantitative easing monetary policy to force other countries to appreciate their currencies.
China's economic growth is set to slow down in 2011, while other developing countries will maintain high growth rates. Wang believes that these other countries will see economic breakthroughs similar to that seen by China in recent years, which will lead to a rise in energy prices, further pushing up China's CPI.
Kai-Fu Lee, chairman and CEO of Innovation Works: Mobile Internet access will become a common mode of communication in 2011
China's number of mobile phone users reached about 800 million around the end of June, accounting for 16 percent of the global mobile phone market. Over one-third of these mobile phone users surf the Internet with their phones, meaning that China's opportunities for the expansion of its online industries will be bountiful in the coming year. "Software for personal computers has become a saturated market, while there is enormous growth potential for mobile Internet software, considering the huge pool of 800 million users," said Kai-Fu Lee.
The increasing popularity of mobile Internet usage is also changing users' habits. According to statistics from China Mobile, the country's largest mobile phone service provider, text messaging and related services saw a decrease in usage in some provinces in 2010, while explosive growth was seen in the usage of Internet browsing services.
Lee believes that barriers to the development of mobile Internet in China will be eliminated in 2011. "The prices of smart phones are dropping sharply; many users are beginning to regard mobile phones as their primary tool for Internet browsing," Lee said. The broadening of product distribution channels has also motivated software developers, providing them with more sources of profit.
Lee believes that mobile Internet will become one of the most popular means of communication in 2011, with China's new 3G mobile phone network allowing for higher quality service and more options for mobile phone users.
Su Hainan, Director of the Labor and Wage Institute of the Ministry of Human Resources and Social Security: We should make a bigger "cake" and divide it more fairly
Increases in the costs of daily necessities in 2010 have greatly increased living costs for ordinary citizens, resulting in a demand for income distribution reform. "We are trying to make a bigger 'cake' while dividing the 'cake' more fairly," said Su Hainan.
Su believes that the determining factors for wage increases will be GDP growth, policy changes and variances in supply and demand in the labor market. The main problems for income distribution reform lie in the massive gap between China's rich and poor, as well as a lack of organization. "In addition to affecting the lives of China's citizens, these problems could eventually become larger and ultimately threaten social stability. These problems must be given proper attention and solved quickly," said Su.
Income distribution reform has been on the table since 2006, when the Political Bureau of the CPC Central Committee held conferences on the topic. However, there has been no substantive progress in the area since then.
Yao Jingyuan, chief economist of the National Bureau of Statistics: China's economic development pattern must be changed
The Fifth Plenum of the 17th CPC Central Committee, held in October, included discussions regarding the transformation of China's economic development pattern. Changes to China's economic development are a significant part of the 12th Five-Year Program; analysts believe that this shows how urgently the reforms are needed.
"The biggest problem for the Chinese economy is not increasing its speed, but improving its quality," said Yao Jingyuan. Since China started its program of reforming and opening up over three decades ago, the average annual growth of China's economy has hovered around 9.8 percent. Despite the impact of the global financial crisis, Chinese economy still grew by a staggering 9.1 percent in 2009.
The rapid growth of the Chinese economy is largely attributable to the development of its labor-intensive and energy-intensive industries. Faults in this growth model have become more apparent in recent years, with its momentum finally starting to show signs of waning. The transformation of China's economic development pattern is urgently needed to make the country's economic growth sustainable.
"The pursuit of faster growth must be put aside in order to realize economic transformation. I believe it is acceptable to lower the GDP growth rate to 8 percent so that we can focus on the optimization of industrial structure," said Yao.
Although efforts to China's economic infrastructure have been occurring for many years, there have been few obvious results. Yao believes that in order to make significant progress in 2011, officials must take charge and renew their efforts to reshape China's economy. In addition, China's largest companies must be encouraged to take part in the reforms; Yao believes that the Chinese Government should help these companies to retain their high profits while changing their production methods.
Li Jian, Vice Director of the Department of China's Foreign Trade Studies at the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce: Renminbi appreciation in 2011 will not exceed 6 percent
"The exchange rate of the renminbi will keep climbing; its appreciation is both a short- and long-term trend," said Li Jian. The quantitative easing monetary policy adopted by the United States will continue to allow the U.S. dollar to depreciate, causing the renminbi to face enormous appreciation pressure.
It is widely known that foreign trade is an important part of China's economic growth and has played a significant role in providing job opportunities. Since the beginning of the global financial crisis, slackening exports and the rising cost of raw materials have put some export-oriented companies into difficulty. Li believes that if the renminbi appreciates sharply, it will directly affect China's employment environment and could even disrupt international supply chains.
Li said that China's exchange policy for 2011 will ensure that the renminbi appreciates gradually and smoothly, avoiding sharp increases that could negatively impact China's economy. "I don't think the appreciation of the renminbi in 2011 will be much higher than that of this year. It won't be higher than 6 percent," said Li.
Zhang Yansheng, Director of the Institute for International Economics Research of the National Development and Reform Commission (NDRC): China may see trade wars in 2011
In the second half of 2010, the U.S. Federal Reserve announced that it would start a second round of quantitative easing in order to reverse high unemployment rates. While stimulating the U.S. economy, the policy also created an economic bubble and "false prosperity" in other industrialized countries. "Once the bubble bursts, it will deal a blow to China's economy and foreign trade," said Zhang Yansheng.
Since the beginning of 2010, major economic powers like the United States, the European Union and Japan have opted for protective trade policies; Trade protectionism has been on the rise all over the world. Over the past two years, China has encountered trade frictions extending from low value-added industries like textile to technology-intensive and high value-added industries, such as new energy, electronics industry and IT industry. These trade frictions were not only targeted at specific products, but also industrial policies and exchange rate mechanisms.
Due to the excessive liquidity worldwide, a weak U.S. dollar and market speculation, prices of energy resources in the international market are likely to keep rising, which will directly drive up the prices of raw materials in the domestic market. Meanwhile, the pressure from resources and environment is mounting and the pricing reform on resource products has become more urgent, which will also push up raw materials' prices. "These factors will make inroads into the profitability of China's exports-oriented companies," said Zhang.
China's Ministry of Commerce has recently released a report on the overall environment of China's foreign trade, saying that China's foreign trade will continue to grow in 2011, but probably at a lower speed.
The Institute for International Economics Research of NDRC estimates that China's foreign trade surplus for 2010 will be $180 billion and will drop to $126 billion for 2011.