BEIJING (Reuters) - China’s economy could grow at more than 8 percent in 2013, giving some underpinning to global economic activity that is set for a mild, tortuous recovery this year, the head of China’s sovereign wealth fund said on Saturday.
“China’s economic growth could be over 8 percent this year. China’s economy supports a very large part of global demand,” Lou Jiwei, chairman of the China Investment Corp. (CIC), told a forum.
China’s economy expanded an annual rate of 7.9 percent in the fourth quarter of 2012, snapping seven consecutive quarters of weaker growth, as a raft of pro-growth policies kicked in.
The Q4 bounce helped lift full year growth in the world’s second biggest economy to 7.8 percent which, though China’s slowest pace for 13 years, generated roughly a third of global economic growth of 3.2 percent - itself the worst since the 2009 financial crisis and just barely above the 3 percent mark economists say signals a worldwide recession.
Lou said that even if China’s growth did accelerate further in 2013, increased financial market volatility caused by Europe’s debt crisis and concerns about the U.S. fiscal position, left the world economy set for a “mild, tortuous and slow recovery” at best.
Problems in debt-constrained countries, though, meant opportunities for cash-rich China, Lou said, adding that the government should encourage local firms to step up their efforts to expand and invest abroad.
“There are big opportunities for countries with cash on their hands, especially for China. We should grasp the opportunities and give firms more freedom in investing overseas,” he said.
China has accumulated the world’s biggest store for foreign reserves, some $3.31 trillion as at the end of 2012, generated largely as a function of capital controls that have forced Chinese exporters to sell foreign currency to the central bank.
Easing capital controls to let firms more readily use export earnings to buy overseas assets would please many executives who say strict rules and a lengthy approval process for outbound investments are big impediments to doing cross-border deals.
Despite the difficulties, Chinese non-financial outbound foreign direct investment hit a record $14.7 billion in December, taking the 2012 total to $77.2 billion from 2011’s $60.1 billion, Commerce Ministry data shows.
Beijing targets a total of $560 billion in outbound foreign direct investment in the five years to end 2015.
Zeng Peiyan, a former vice-premier, told the same forum that China’s leaders must have “political courage” to quicken economic reforms to help sustain long-term growth.
Zeng, now chairman of top Beijing think-tank the China Centre for International Economic Exchanges (CCIEE), said the Chinese economy was “shifting gear” and clearly decelerating from the double-digit average growth rates of the past three decades to 7-8 percent in the foreseeable future.
Chen Xiwen, deputy director of the office of the Central Financial Work Leading Group, a powerful body that charts key government economic policies, said China’s growth strategy should focus on improving urbanisation in its next stage of development.
Chen, who also heads the ruling Communist Party’s office on rural policy, said China’s actual urbanisation rate is around 35 percent - lower than the official rate of 51 percent.
“In other words there are some 200 million (rural) people who have entered cities, but have not yet become urban residents. This is a big problem that we need to deal with in the future urbanisation process,” he said.
China’s rigid household registeration, or hukou, rules are seen by many analysts as China’s most pressing reform item as a change there would address inequality and boost domestic demand, rebalancing the core growth drivers of the economy.
The millions of migrant workers who have entered cities from the 250 million-strong rural workforce are denied access to services like health and education, forcing them to save hard and constraining spending that would boost domestic consumption.
Spreading the benefit of China’s ascent to its position as a global economic powerhouse is widely seen as the best way of quelling the risk of popular revolt and officials have pledged to gradually loosen hukou controls.
A newly recalibrated official index this month indicated China’s gap between rich and poor was so wide that serious social dissatisfaction may be brewing.
Reporting by Kevin Yao; Editing by Nick Edwards and Ron Popeski