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Faster 8.2% growth in China’s GDP in 2014
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China’s annual economic growth is likely to accelerate to 8.2 percent in 2014 from an expected 7.7 percent this year, driven by stronger domestic demand, the OECD said yesterday.
“Growth is picking up and inflation remains low, domestic demand has led the turnaround,” the Organization for Economic Cooperation and Development said in its latest report on the global economic outlook.
The government is aiming for 7.5 percent growth in 2013.
The OECD highlighted the need for Beijing to quicken structural reforms in favor of stronger domestic consumption, as economic expansion still relies heavily on investment.
“With the economy recovering, there is now a favorable window to push forward with structural reform, in particular financial liberalization, encouraging labor mobility and tax reform,” the OECD said.
Last week, China’s leaders pledged to make the most sweeping economic and social reforms in nearly three decades to put the world’s second-largest economy on a more stable footing.
China’s reforms may support economic growth eventually, but certain reforms may have some short-term negative impact on the economy, the OECD said without elaborating.
“There are also downside risks, notably stemming from local public debt. Mishandled defaults, were they to occur, might jeopardize the health of the banking system and confidence in capital markets,” it added.
China’s local governments are saddled with piles of debt, resulting from unfettered spending spurred by the country’s massive stimulus program during the global financial crisis in 2008-2009.
China’s National Audit Office is conducting an audit of all government debt and its report is expected to come out soon. Its data showed local debt at 10.7 trillion yuan (US$1.8 trillion) by end-2010.
Standard Chartered, Fitch and Credit Suisse have estimated local government debt at the equivalent of anywhere between 15 percent and 36 percent of China’s gross domestic product.
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