Deputy managing director predicts soft landing despite property slump
Zhu Min, an International Monetary Fund official, remains optimistic about China's chances of avoiding economic troubles even as the latest data points to a further slump in the country's property market.
"China's heading for a soft landing," Zhu, deputy managing director at the IMF, told a conference in Hong Kong on Monday, without elaborating.
Worries that the Chinese economy will slow significantly have recently been haunting global markets, particularly the commodities market.
They became more intense after the Chinese government set a GDP growth rate of 7.5 percent for the year, down from the 8 percent called for in the past seven years, and have been further aggravated by a slide in home prices.
The prices of new homes in 27 out of 70 cities surveyed last month declined from what they had been a year earlier, the National Bureau of Statistics said over the weekend. Only in six cities did they remain unchanged.
Last week, Adrian Mowat, chief Asian and emerging-market strategist for JPMorgan Chase & Co, suggested that the slow car sales and cement and steel production seen recently indicate that the country is already experiencing "a hard landing".
Analysts, though, say they still hold out hope that the central government can prevent that from happening.
"For the time being, I am not too worried," said Kevin Lai, a Hong Kong-based senior economist at the research and consulting firm Daiwa Capital Markets Ltd.
"The central government will not allow a hard landing in the property market. It will take actions and retract some of the restrictive measures when such a threat emerges."
While trying to allay concerns about economic troubles, Zhu acknowledged the existence of some flaws in the Chinese economy. An example of that, he said, is the country's unbalanced economic growth.
He said the country's GDP depends too greatly on investment, which is "not sustainable".
Investments, exports and domestic consumption have been the main drivers of China's economic growth.
In response to doubts about the strengths of the global economy, Zhu said domestic demand needs to become a greater force.
The global economy is faring better, but risks remain. Financial markets, particularly those in the eurozone, continue to be fragile, he said.
He called on China to boost its economic growth by stoking domestic demand and further opening its service sector, which will help to increase productivity and spur employment.
He said the money that the Chinese put into investing constitutes too large a portion of the country's GDP.
Vice-Premier Li Keqiang said on Sunday that China should make tough reforms to its economy, especially in taxes, financing, prices and income distribution.
Zhu also noted on Monday that inflation will pose long-term difficulties for China.
Zhu, a former deputy governor of China's central bank, was appointed to the newly established position of deputy managing director at the IMF last July, a sign that China is gaining influence in the world.