China's Growth Goes Stronger in Coming Years: SSB Forecast

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Last updated at: (Beijing Time) Tuesday, December 11, 2001

China's Growth Goes Stronger in Coming Years: SSB Forecast

"We have revised down China's GDP growth forecast to 7.4 percent for 2001 and 7 percent for 2002, but we expect its growth to increase to 8 percent in 2003," said Yiping Huang, a senior economist for Salomon Smith Barney (SSB), a world's leading investment bank.

Thanks to active government spending and positive WTO contribution, the Chinese economy can probably remain relatively strong with the GDP growth going up to 8 percent in 2003, economists in Hong Kong forecast.

"We have revised down China's GDP growth forecast to 7.4 percent for 2001 and 7 percent for 2002, but we expect its growth to increase to 8 percent in 2003," said Yiping Huang, a senior economist for Salomon Smith Barney (SSB), a world's leading investment bank.

Huang believed that WTO membership will on average add about 1 percentage point to China's GDP growth in each of the first five years after the country's accession.

"Given its current income level and reform momentum, we believe China can achieve an average growth rate at around 7.5 percent for the next 10 years, and this compares to average growth of over 10 percent in the last 10 years," he said.

In the near-term, industries related to urban consumers and government spending will probably benefit while some time next year industries benefiting from WTO reforms and global rebound may gain the upper hand, Huang noted.

Although more people may lose their jobs and a lot of inefficient companies may go bankrupt during the first five years, China can probably manage the transition in a smooth fashion with the help of the booming private sector and a developing social security system, he added.

Other SSB analysts also expected the structure of the Chinese economy to go through profound changes. The land-intensive sectors, resources-intensive sectors and capital-intensive sectors are likely to shrink, while labor-intensive sectors will probably

expand, they predicted.

From the perception of financial market, the analysts again recommended overweight on China's external debt as they are less vulnerable to global instability. China has maintained its sound debt-service capability and foreign reserves consistently rise for many years, they noted.

According to Huang, also vice-president in the economic and market analysis for the Hong Kong-based SSB Asia Pacific, domestic demand has been the main driver for China's growth this year.

Researcher here noted that China's consumer spending benefited from the pay rise, with growth of retail sales up around 10 percent in most months but up to 10.5 percent, and supported by government spending on infrastructure, fixed asset investment by state-owned companies also grew by an average of 17.4 percent in the first 10 months.

Export growth collapsed from 28 percent in 2000 to around zero percent in recent months, but this performance is still very strong compared to the significant negative growth experienced by other Asian countries, the researchers believed.

WTO to Mean Higher Imports for China, SSB Analysts