News Analysis: Optimism over China’s 2014 growth despite challenges

%3CP%3E%3CFONT%20face%3DVerdana%3EThough%20latest%20figures%20indicate%20China%27s%20economy%20might%20have%20lost%20some%20steam%20into%20the%20close%20of%202013%2C%20most%20economists%20are%20optimistic%20over%20the%20country%27s%20growth%20momentum%20in%202014%2C%20with%20consensus%20that%20the%20economy%20will%20expand%20by%20about%207.5%20percent.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3EThey%20have%20also%20warned%20against%20risks%20related%20to%20industrial%20overcapacity%2C%20shadow%20banking%20and%20shadow%20credit%20expansion%2C%20local%20government%20debt%2C%20high%20interbank%20lending%20rates%20and%20financial%20liberalization.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3EThe%20next%2012%20months%20will%20be%20%22a%20year%20with%20hopes%20and%20challenges%22%20for%20China%2C%20according%20to%20a%20report%20by%20a%20research%20team%20with%20the%20Bank%20of%20America%20Merrill%20Lynch%20led%20by%20chief%20China%20economist%20Lu%20Ting.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3E%22In%202014%2C%20inflation%20will%20be%20slightly%20higher%20but%20remain%20tamed%20at%203.1%20percent%2C%20and%20growth%20could%20be%20more%20stable%20on%20improved%20macro%20management%20of%20Beijing%2C%20albeit%20down%20slightly%20to%207.6%20percent%2C%22%20Lu%20said%20in%20the%20report.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3E%22We%20don%27t%20expect%20a%20hard%20landing%20in%20growth%2C%20a%20systematic%20financial%20crisis%20or%20nationwide%20debt%20crisis%2C%22%20he%20added.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3ELu%20predicted%20that%20several%20themes%20will%20dominate%20the%20Chinese%20economy%20and%20its%20financial%20markets%20in%202014%20--%20a%20more%20confident%20leadership%2C%20bottom-up%20interest%20rate%20liberalization%20to%20bring%20revolutionary%20changes%2C%20a%20cleanup%20of%20mounting%20local%20government%20and%20corporate%20debts%2C%20and%20China%20being%20affected%20by%20a%20robust%20growth%20rebound%20in%20the%20United%20States%20as%20well%20as%20the%20Federal%20Reserve%27s%20QE%20tapering.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3EThe%20Bank%20of%20America%20Merrill%20Lynch%20report%20forecast%20that%20China%27s%20GDP%20growth%20might%20moderate%20from%207.7%20percent%20in%202013%20to%207.6%20percent%20in%202014.%20Sequential%20quarter-on-quarter%20GDP%20growth%20could%20be%20in%20a%20small%20range%20of%201.8%20percent%20to%202.0%20percent%20in%20the%20whole%20of%202014.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3E%22Our%207.6-percent%20growth%20forecast%20for%202014%20is%20right%20in%20the%20middle%20of%20a%20wide%20spectrum%20of%20Street%20forecasts%2C%22%20according%20to%20the%20report.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3EFor%20optimists%2C%20or%20%22bulls%2C%22%20who%20predict%20growth%20of%20above%208.0%20percent%2C%20they%20believe%20the%20recovering%20U.S.%20and%20European%20economies%20will%20greatly%20quicken%20China%27s%20exports.%20Meanwhile%2C%20those%20%22bears%22%20who%20expect%20below%207.0-percent%20growth%20believe%20reforms%20such%20as%20reducing%20local%20government%20debt%2C%20cutting%20overcapacities%20and%20curbing%20shadow%20banking%20will%20significantly%20slow%20growth%2C%20Lu%20said.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3EHe%20explained%2C%20%22We%20are%20not%20as%20bullish%20on%20China%27s%20external%20demand%20as%20we%20expect%20a%20strong%20Renminbi%2C%20rising%20labor%20costs%2C%20and%20weak%20emerging%20markets%20will%20continue%20to%20weigh%20on%20China%27s%20exports.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3E%22We%20are%20not%20as%20bearish%20because%20we%20believe%20shadow%20banking%20is%20not%20that%20scary%2C%20and%20deleveraging%20of%20local%20governments%20will%20be%20gently%20balanced%20by%20leveraging%20up%20the%20central%20government%20and%20restarting%20IPOs.%22%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3EHSBC%20chief%20China%20economist%20Qu%20Hongbin%20was%20also%20relatively%20optimistic%20over%20China%27s%20growth%20prospects%2C%20projecting%20a%207.4-percent%20growth%20for%20the%20world%27s%20second-largest%20economy%20in%202014.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3E%22We%20see%20a%20bigger%20upside%20than%20downside%20risk%20in%20our%202014%20forecast%2C%22%20he%20said%20in%20a%20report.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3EThe%20risks%20to%20the%20forecast%20may%20tilt%20to%20the%20upside%2C%20if%20external%20demand%20turns%20out%20to%20be%20better%20than%20expected%20and%20property%20investments%20remain%20strong%20due%20to%20softer-than-expected%20measures%20to%20cool%20the%20real%20estate%20market%2C%20he%20said.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3EQu%20believes%20that%20the%20Chinese%20economy%20could%20expand%20by%20above%207.5%20percent%20for%20the%20first%20half%20of%202014%2C%20before%20some%20moderation%20in%20the%20second%20half%20of%20the%20year%2C%20reflecting%20the%20impact%20of%20the%20base%20effect.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3EAlthough%20slower%20restocking%20activity%20may%20pose%20some%20downside%20risks%20in%20the%20near%20term%2C%20Qu%20maintained%20that%20China%27s%20growth%20will%20be%20supported%20by%20such%20factors%20as%20improving%20external%20demand%2C%20strong%20infrastructure%20investment%2C%20resilient%20consumer%20spending%2C%20and%20reform%20dividends.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3EAccording%20to%20the%20senior%20economist%2C%202014%20in%20China%20will%20be%20a%20year%20of%20reform%2C%20covering%20areas%20ranging%20from%20taxation%20and%20land%20markets%20to%20financial%20liberalization%20and%20service%20sector%20deregulation.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3EThis%20should%20fuel%20growth%20by%20unleashing%20the%20power%20of%20private%20investment%20and%20consumption%2C%20offsetting%20the%20short-term%20pain%20experienced%20during%20the%20early%20stages%20of%20reform%2C%20he%20said.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3ETo%20mitigate%20risks%2C%20Qu%20urged%20China%20to%20curb%20shadow%20lending%20while%20regulating%20local%20government%20borrowing%2C%20rather%20than%20tightening%20overall%20credit%20conditions%20for%20the%20real%20economy.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3EWang%20Tao%2C%20chief%20China%20economist%20at%20UBS%2C%20projected%20China%27s%20GDP%20growth%20in%202014%20at%207.8%20percent%2C%20slightly%20higher%20than%20in%202013.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3E%22We%20only%20expect%20a%20modest%20slowdown%20in%20domestic%20investment%2C%20which%20should%20be%20more%20than%20offset%20by%20stronger%20export%20and%20domestic%20consumption%20growth%2C%22%20she%20wrote%20in%20a%20research%20note.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3EWang%2C%20however%2C%20said%20there%20are%20three%20questions%20about%20China%27s%20macro%20policy%20and%20outlook%20in%202014%20and%20significant%20unease%20over%20them%20in%20the%20market.%20These%20three%20big%20issues%20are%20excess%20credit%20growth%2C%20local%20government%20debt%2C%20and%20liquidity%20squeezes%20and%20rate%20spikes%20in%20the%20interbank%20market.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3EShe%20maintained%20that%20China%20will%20pursue%20a%20slightly%20more%20prudent%20monetary%20policy%20and%20will%20better%20regulate%20the%20shadow%20credit%20market%20in%202014%2C%20slowing%20the%20pace%20of%20leverage%20but%20refraining%20from%20outright%20deleverage.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3ELocal%20government%20debt%20will%20be%20put%20on%20a%20more%20sustainable%20and%20transparent%20path%20but%20will%20continue%20to%20grow.%20Periodic%20liquidity%20squeezes%20and%20rate%20spikes%20will%20likely%20persist%20but%20the%20negative%20impact%20on%20overall%20growth%20should%20be%20limited%2C%20Wang%20added.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3EAlaistair%20Chan%2C%20an%20economist%20with%20Moody%27s%20Analytics%2C%20said%20China%27s%20economy%20enters%202014%20with%20solid%20momentum%2C%20low%20inflation%2C%20and%20rising%20household%20incomes.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3EChan%20expects%20China%27s%20economy%20to%20expand%20by%207.5%20percent%20in%202014%20and%20make%20modest%20progress%20toward%20rebalancing.%3C/FONT%3E%3C/P%3E%0D%0A%3CP%3E%3CFONT%20face%3DVerdana%3EHowever%2C%20China%20faces%20a%20range%20of%20problems%20this%20year%2C%20such%20as%20a%20housing%20market%20at%20risk%20of%20forming%20bubbles%2C%20high%20local%20government%20debt%2C%20increasing%20pollution%2C%20and%20overcapacity%20in%20many%20industrial%20sectors%2C%20Chan%20warned.%3C/FONT%3E%3C/P%3E%3CFONT%20face%3DVerdana%3E%0D%0A%3CP%3E%3CBR%3E%28Xinhua%20net%29%3C/P%3E%0D%0A%3CP%3E%3C/FONT%3E%26nbsp%3B%3C/P%3E