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Interview: China unlikely to see hard landing in 2012, says expert

(Xinhua)

09:19, December 22, 2011

WASHINGTON, Dec. 21 (Xinhua) -- Although the eurozone crisis is running deeper and deeper, it is highly unlikely to see a hard landing of Chinese economy next year, said an American expert here on Wednesday.

Most analysts estimated that the Chinese economic growth rate this year would be somewhere between 9.1 percent and 9.3 percent while next year it would drop to 8.5 percent. But Yukon Huang, senior associate at Carnegie, believes that eight percent to 8.5 percent is actually a good growth rate which is "more sustainable" and a rate that China should gravitate towards over the next few years.

"China is actually above its potential in the past because of the stimulus program," he added.

As for the possibility of a collapse or a hard landing, Huang said it was highly unlikely for two reasons.

First, China has very strong balance sheets. The budget is running a significant amount of surplus with revenues so that the government has flexibility in dealing with a potential downhill slide.

Second, reserve levels are very high and Chinese banks have very low ratios of non-performing loans in property market, and the government could step in with state banks so a financial collapse might not be seen in China like elsewhere.

However, the elements of a hard landing are possible in the coming years. One of them depends on the bubble in property market. The investment in property has soared to 12 percent of GDP, which might be a sign of a bubble.

"The property bubble in China will be a property bubble with Chinese characteristics," said Huang, "It is not a sector that has been highly leveraged but there's construction, decoration, insurance and all sorts of economic activities associated with the property development."

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