China rules out possibility of economic hard landing

Experts lower GDP forecasts to 7.3-7.4%

Amid downward projections for China's economic growth from around the world, the Chinese government has ruled out the possibility of a hard landing and denied there would be any significant stimulus, instead stressing the role of reform in boosting growth.

The IMF Saturday lowered its growth expectations for this year and next in Europe, Japan and China, according to Reuters.

China's annual GDP growth quickened slightly to 7.5 percent in the second quarter from 7.4 percent in the previous three months, but the economy lost steam going into the third quarter as the property market slowed.

Ahead of the official release of third-quarter GDP growth, UBS and HSBC expected growth to reach 7.1 percent and 7.3 percent respectively, either of which could signal the slowest year-on-year expansion in China since the first quarter of 2009 and the fourth quarter of 2001 before that, Reuters reported.

Similarly, the Chinese Academy of Social Sciences lowered forecasts for 2014 GDP growth to 7.3 percent from 7.4 percent and forecast 7 percent for next year's GDP growth rate in a report published Friday, news portal chinanews.com reported.

Chen Wei, an analyst at Beijing-based brokerage firm China Minzu Securities Company, told the Global Times that the economy is projected to grow by 7.3 to 7.4 percent for 2014, before moderating to about 7.2 percent next year.

Zhao Xiao, a professor of economics at the University of Science and Technology Beijing, believes that China's economic growth will continue to slow in the long-term.

"It will take around two to three years for complete economic recovery in China," Zhao told the Global Times.

Despite the downward projection, Chinese Premier Li Keqiang remains upbeat on China's economic growth prospects. Speaking at the Hamburg Summit in Germany Saturday, Li said the country is not going to see a hard landing in its economy, and has the conditions and capability to achieve economic growth of around 7.5 percent this year.

A pace around the 7.5 percent target - whether slightly higher or lower - will be acceptable as long as employment is guaranteed, consumer prices are stable, household income is raised and progress is made in ecological and environmental preservation, Li said.

Echoing such sentiments, Ma Jun, chief economist of the Research Bureau of the People's Bank of China, Saturday told a panel discussion at the Institute of International Finance in Washington that "some further deceleration may be possible" in China's real estate sector, but he did not see a substantial net impact on jobs, reported AFP.

Ma said overall the government does not need to unleash large-scale stimulus, which could at any rate end up back in the real estate sector where bad loans are already mounting. "At the macro-level, I think we need to avoid excessive stimulus. [Across China] the investment-to-GDP ratio is still too high," Ma said.

Similarly, Zhao believes it is neither necessary nor feasible to implement a monetary stimulus policy in China.

With soaring government debt and leverage ratios, large-scale monetary stimulus can only be counter-productive, he said, adding he prefers a mini-stimulus policy to stabilize the real estate market as it is now the main downside risk for the Chinese economy.

During his speech at the Hamburg Summit, Premier Li said in the face of downward economic growth, China had not unleashed strong stimulus, loosened monetary policy or increased the deficit, but strengthened fiscal, financial and administrative reform, innovated macro-control and carried out structural reform to stimulate the market's huge vitality and creativity. Li also vowed to further strengthen reform and innovation.

Economists agreed upon on the significance of greater reform in boosting the economy.

"Lacking strong growth momentum, the Chinese economy needs new growth mechanisms and reform to climb out of downturn," Zhao said, noting the ongoing reform has achieved very little so far.

He urged further streamlining of administrative power and the break-up of interest groups to push forward the reform.