1. The Economist magazine World in 2012 predicts the world economy to expand by 3.3% in 2012 (on a purchasing-power-parity basis), down from 3.7% in 2011. But the risk of a global recession (world growth of less than 3%) is a very high 40%. China will again do much to lift global growth. The authorities will keep the economy humming ahead of a transfer of political leadership in late 2012. This will be welcome news for commodity exporters, but raises the risk of a “hard landing” in China in coming years.
2. The World Bank predicts China gross domestic product will rise 8.4 percent next year and about that pace thereafter. China faces the risk of a “strong” impact from a real-estate correction.
In China, “the risk in the short term of any hard landing is very limited — we believe that a soft landing will take place,” Hofman said. The World Bank predicted China’s GDP growth will ease next year from a 9.1 percent pace in 2011.
A real-estate bust would have a “strong impact on domestic demand and consumer sentiment” in China, according to the report. Even so, the government has “ample fiscal space and room for monetary policy normalization should such a need arise, more so now that inflation seems to be on the wane again,” the bank said.
3. Carnegie Endownment predicts – Even with sound management, China’s GDP growth is expected to continue slowing to between 8 and 9 percent in 2012 and between 7 and 8 percent in 2013. Slower but higher quality growth is needed for sustainability. Although the economic challenges China faces are unusually complex, and the coming leadership transition scheduled for late 2012 complicates the situation, widespread fears of a “hard landing” appear overblown
China’s economy has arrived at a critical juncture. The observed slowdown since the second quarter of 2011 may continue in an orderly fashion and promote economic rebalancing. But if Beijing makes serious policy mistakes (for example, by loosening monetary policy too quickly), higher inflation, a rekindling of property bubbles, and a “hard landing” could be in store over the next few years. So far the government has shown foresight and restraint in responding to the painful adjustments in manufacturing and construction that are occurring as a result of slower growth and rising production costs. It must continue to support economic restructuring, and even embrace it, with consistency and vigor.
Pieter Bottelier, former chief of the World Bank’s resident mission in Beijing, is a nonresident scholar in Carnegie’s International Economics Program and senior adjunct professor of China Studies at the School of Advanced International Studies (SAIS) at Johns Hopkins University.
Global research firm Macquarie has downgraded India’s economic growth forecast for the next fiscal period beginning April, 2012, to 6.9%, from 7.9% previously. However, it has maintained its GDP growth projection for the country in the current fiscal, ending March 2012, at 7.4%.
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