Business / Economy

China faces economic slowdown, not Minsky Moment

(Xinhua) Updated: 2014-04-01 17:49

For China's economy, improving external demand and solid domestic consumption are sources of support for growth. Deepening reforms are also expected to inject dividends into the economy.

China's real exports in 2014 are set to recover on the back of better growth in the United States and Europe, despite a relatively strong Renminbi and weak emerging markets. Fast increase in the sub-index for new export orders in March's HSBC and official PMIs, both of which stayed above 50, testified to this.

Exports, along with consumption and investment, have been one of the three main drivers for China's growth. External demand supports about 12 percent of the country's GDP and absorbs some 35 percent of industrial output.

Economists believe that net exports are expected to contribute positively to China's GDP growth in 2014, for the first time in four years.

Consumption is predicted to see firmer growth this year since base effects become more favorable a year after public consumption controls. Moreover, steady wage growth and the expansion of the social security network are set to support private consumption.

The government's reform measures, as promised, could be growth supportive if they help improve efficiency. Over the past 30 years, economic reforms have been able to boost China's GDP and its potential significantly.

It is also worth mentioning that China's economy sometimes marches to the beat of its own drummer. Economic activity in the beginning of the year tends to be slow and macro data are often distorted by the Chinese New Year holiday. So, economists should be cautious when using them to predict the rest of the year.

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