China to see moderate recovery in 2013: economist (2)

Since the beginning of this year, the approval of the homebuyers' first mortgage has been eased. Mortgage rates have been lowered a couple of times.

Though the restriction was still in the place, yet the market sentiment has been improving since this spring, Wang observed. Sales in the property, especially in residential, improved since April or May this year. "We consider the property sector the most important sector in the Chinese economy. The recovery in the property market laid the ground for the overall recovery in China. "

The third reason for the recovery is the end of the de-stocking. There were many reports of excessive capacity and the buildup of inventory in many sectors earlier this year. But as some sectors began to recover, the de-stocking momentum has faded and the de- stocking will probably end next year, she said.

Wang also said the improvement of Chinese export in the last two or three months is unlikely to continue given the uncertainties remaining in the Euro-zone and in the U.S. regarding the fiscal cliff.

"So, in other words, the recovery in China is not going to be an export-led recovery, but mainly a domestically-led recovery."

As to the inflation, Wang expected inflation to pick up from the fourth quarter this year, and rising inflation is mainly driven by another food cycle and rising prices of commodities and grain. She also predicted that the Chinese government will continue pushing forward some of the price reform, in such areas as utilities.

"So we expect CPI inflation to average at about 3.5 percent next year, compared to 2.7 percent this year," she said.

Wang also believed that there would be no more interest rate cut in the coming year. "If anything, we see a risk of possible interest rate hike in the second half of 2013, as inflation rises above 3.5 percent. The benchmark deposit rate right now is at 3 percent, so if the inflation rise above 3.5 percent, there would be a risk for interest rate increase," she added.

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