CASS predicts slow growth for China’s GDP

The Chinese Academy of Social Sciences (CASS) yesterday made a rare projection that China's economic growth would slow to 7.3 percent this year, below the government's annual target of 7.5 percent.

The slowdown is blamed on a deceleration in the property sector while government efforts to boost infrastructure construction would fail to offset the sagging real estate investment, the CASS said in an analysis report.

Li Yang, vice chairman of the CASS, said China's economy is now characterized by a slower but healthier and sustained growth.

"It is correct to accelerate various reforms to move toward a healthier growth," Li said. "We can no longer resort to measures such as a dramatic cut in interest rates, like we always did before, for the sake of fulfilling the growth target."

China has turned to "targeted stimulus" since March to bolster its economy such as offering more credit support to smaller businesses, allowing banks more financial flexibility and providing funds for railway projects.

Li, however, said the 7.3-percent growth would still be seen as a reasonable rate which will offer steady employment and provide social stability.

China's economy expanded 7.7 percent from a year earlier in 2013, the lowest level in 12 years. It grew 7.5 percent in the second quarter, up from 7.4 percent in the first three months.

But since then, major activity indicators, including industrial production, fixed-asset investment and retail sales, all weakened in July and August, triggering market fears this year's economic growth target of 7.5 percent will not be met.

Goldman Sachs has cut its third and fourth-quarter growth projection for China to 7.1 percent from the previous 7.3 percent and 7.2 percent respectively, and predicted a 7.3 percent gain for the whole year.

Swiss bank UBS expects the Chinese economy to grow 7.2 percent this year, also below the growth target.

But the World Bank and the International Monetary Fund were more optimistic and both predicted China's economy to expand 7.4 percent this year.

HSBC said the official target could be met with the government unveiling accommodative policies like easing of curbs on the property sector, which was unveiled by the People's Bank of China on September 30.

"From a cyclical perspective, more monetary easing measures are needed to support the official growth target of 7.5 percent," said Qu Hongbin, chief economist for China at HSBC, in a note.