Double-dip recession unlikely in China

2011-10-24 11:29:09

Though the world's second largest economy has seen mild slowdown in its economic growth for three straight quarters so for, the strong economic drivers suggest China's economy will keep its stable and relatively fast growth and the likelihood of the economy plunging into recession is very small. Experts agree that it is not time to relax monetary policy in the short term as the country is still facing increasing uncertainties both at home and abroad.

Small possibility of double-dip recession

Analysts agreed that even though the risk of double-dip recession of the global economy looms due to debt crises and lackluster economic growth in major developed countries, the risk of world's second-largest economy experiencing such a recession in the near future is very low.

Despite challenges and uncertainties internally and externally, China's economy will likely maintain its stable and relatively fast growth in the coming period, boosted by a strong growth momentum, NBS spokesman Sheng Laiyun told a recent press conference.

"China's economic growth is stable, and the possibility of a double dip is very small in the coming period," he said.

The country's GDP grew 9.1 percent year-on-year in the third quarter of the year, compared to 9.5 percent in the second quarter and 9.7 percent in the first, the National Bureau of Statistics (NBS) announced on Tuesday.

The economic figures indicated that the drivers of economic growth remain strong.

NBS data showed that fixed asset investment jumped 24.9 percent year-on-year to 21.23 trillion yuan ($3.33 trillion) in the first nine months, of which 59 percent had come from the private sector.

Industrial value-added output shot up 13.8 percent year-on-year in September, up from the 13.5 percent growth in August. Fixed assets investment soared 24.9 percent year-on-year in the first nine months, compared to a 25-percent gain in the January-August period.

Boosted by robust auto and construction materials consumption, the country's retail sales surged 17.7 percent from a year earlier in September, following an increase of 17 percent in August.

Further, China's Purchasing Managers' Index (PMI), another important indicator for economic performance, continued its rise in September. The index rose to 51.2 percent, up from 50.9 percent in August. It marked the second straight month that the index kept rising month-on-month.

Sheng said those economic indexes demonstrate that China's economy is still running stable and relatively fast despite mild slowdown. Therefore, the risk of double-dip recession is quite low.

"There was an obvious trend of the country's economic development shifting from a stimulus policy-driven growth to a self-initiated mode," Sheng pointed out.

Lian Ping, chief economist of the Bank of Communications, said on Tuesday that China's economy will not incur a hard landing.

Lian also said China's economy is unlikely to suffer a double dip as domestic demand remains strong. He said that investment is not likely to decline, the real estate market will stabilize, and the auto market will start to pick up.

Echoing Lian's view, Louis Kuijs, Hong Kong-based chief Asia economist at MF Global Holdings, does not believe that the country will experience a double-dip recession and is confident that China can be an engine for global growth thanks to its manufacturing industry.

Fan Jianping, head of the Economic Forecast Department at the State Information Center, also dismissed concerns about a steep correction.

"Fears of a hard landing (in China) are unfounded," he said, citing still robust domestic consumption.



China Daily