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Chinese economy not to face hard landing: expert

Chinese economy not to face hard landing: expert Source:
Date: 22-02-2012
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SEOUL - The Chinese economy will not face hard landing as major risks facing the world´s No 2 economy lessened significantly compared with the 2008 global financial crisis, a Chinese economist said Tuesday.

"Worries exist about a Chinese hard landing, but three risks facing China weakened significantly compared with the 2008 global financial crisis," Zuo Xiaolei, special advisor to president of China Galaxy Securities, told a seminar held in central Seoul.

Zuo cited unstable external conditions, challenges for small- and medium-sized enterprises (SMEs), consumer price inflation, real estate bubble and funding of municipal governments as major risks, but he noted that all the risks decreased to a greater extent than before.

China´s external conditions remained unstable due to the ongoing European fiscal crisis, but its dependence on external trade reduced considerably. The ratio of exports and imports to gross domestic product (GDP) in China fell to 50 percent in 2010 from 70 percent in 2008, Zuo said, adding that external risks will not bring about Chinese hard landing.

China´s SEMs, hit hardest by the global financial crisis, beefed up their competitiveness by carrying out large-scale restructuring, Zuo said. Non-competitive SMEs fell behind through the restructuring process, and the remaining companies with stronger competitive edge are making inroads into the country´s central and western areas to employ low-wage workers,he added.

Risks of inflation and real estate bubbles have reduced gradually since 2008. China´s consumer price inflation fell late last year helped by tighter monetary policy, boosting expectations that inflation will stay at a low level this year.

As for housing bubble, Zuo said that real estate prices have shown gradual correction since 2008, stressing that gradual correction is totally different from the bubble collapse.

On the funding of municipal governments, Zuo said uncertainties in this regard had reduced considerably as the Chinese authorities had started dealing with the problem earnestly.


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