Economists size up year ahead
January 5, 2012, Thursday
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Print Edition
Print Edition
THE start of a new year triggers the annual ritual of economists looking at what may lie ahead. We asked some prominent economists to tell us what they see for China in 2012. Their predictions include fluctuating food prices and a greater emphasis on improving the daily lives of the Chinese people.
Wang Tao, UBS Securities Asia
While the government is clearly shifting its concern from inflation to growth, there is little evidence that we could expect anything more than a gradual easing of policies.
Considering the structural imbalances in China's economy, we think it is neither necessary nor beneficial for the government to come out with another major stimulus, expand credit rapidly again or to reverse the property sector policies.
To promote domestic demand, the government emphasized the need to ensure and increase social and "livelihood" spending, facilitate service sector development and increase household income.
Specifically, the government plans to cut services and consumption taxes, expand the rural pension scheme to the whole country, increase the government contribution to health care insurance, continue to build social housing, relax entrance barriers for private businesses in services areas and facilitate the development of small financial institutions.
Interestingly, the conference did not, as previously, emphasize "pushing forward with urbanization," which has often been equated with building more urban housing.
Instead, the focus was on creating more jobs and social infrastructure for migrant workers.
Li Wei and Stephen Green,
Standard Chartered Bank
We expect Consumer Price Index growth to drop sharply in the first half, before rising above 4 percent annually again in the third quarter of 2013.
Grain inflation has been rising since 2010, but given that the floor for grain prices is largely controlled by the government and grain stocks seem sufficient at the moment, we see little inflation risk here.
Pork prices have started falling. Pig stocks are rising as a result of this improved profitability. We look for an 11 percent year-on-year price decline by July 2012.
Fresh vegetables and fruit were also important drivers of food inflation from March 2009 to November 2010, but their supply fluctuates, so their effects are less persistent.
Considering overall food inflation, we expect it to fall from 8.8 percent in November 2011 to around 3.3 percent by September 2012. Food inflation should start to pick up gradually in to the second half in 2012 after policy easing in the first quarter, and accelerate further to above 10 percent in the fourth quarter in 2013.
Actual CPI inflation may well be higher than official CPI inflation, but we still believe official inflation is an accurate portrayal of the trend. We think of inflation as a three-year cycle; 2012 will be the bottom.
Wang Tao, UBS Securities Asia
While the government is clearly shifting its concern from inflation to growth, there is little evidence that we could expect anything more than a gradual easing of policies.
Considering the structural imbalances in China's economy, we think it is neither necessary nor beneficial for the government to come out with another major stimulus, expand credit rapidly again or to reverse the property sector policies.
To promote domestic demand, the government emphasized the need to ensure and increase social and "livelihood" spending, facilitate service sector development and increase household income.
Specifically, the government plans to cut services and consumption taxes, expand the rural pension scheme to the whole country, increase the government contribution to health care insurance, continue to build social housing, relax entrance barriers for private businesses in services areas and facilitate the development of small financial institutions.
Interestingly, the conference did not, as previously, emphasize "pushing forward with urbanization," which has often been equated with building more urban housing.
Instead, the focus was on creating more jobs and social infrastructure for migrant workers.
Li Wei and Stephen Green,
Standard Chartered Bank
We expect Consumer Price Index growth to drop sharply in the first half, before rising above 4 percent annually again in the third quarter of 2013.
Grain inflation has been rising since 2010, but given that the floor for grain prices is largely controlled by the government and grain stocks seem sufficient at the moment, we see little inflation risk here.
Pork prices have started falling. Pig stocks are rising as a result of this improved profitability. We look for an 11 percent year-on-year price decline by July 2012.
Fresh vegetables and fruit were also important drivers of food inflation from March 2009 to November 2010, but their supply fluctuates, so their effects are less persistent.
Considering overall food inflation, we expect it to fall from 8.8 percent in November 2011 to around 3.3 percent by September 2012. Food inflation should start to pick up gradually in to the second half in 2012 after policy easing in the first quarter, and accelerate further to above 10 percent in the fourth quarter in 2013.
Actual CPI inflation may well be higher than official CPI inflation, but we still believe official inflation is an accurate portrayal of the trend. We think of inflation as a three-year cycle; 2012 will be the bottom.
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