Soft long landing forecast for China’s economy

[CNBC] Dan Steinbock, a research director of International Business at India China and America Institute (USA), visiting fellow at Shanghai Institutes for International Studies (China) and in the EU-Center (Singapore) provides his analysis of China’s economy.

According to Western critics, China is now in the middle of a hard landing. In reality, China is now in the middle of a soft or long landing, hoping to subdue the housing markets and local debt, even as the very foundations of the economy are under reforms.

In 2014, real GDP growth will be around 7.2 percent to 7.5 percent in annual terms and could remain around 5.5 percent to 6.5 percent until the early 2020s. Inflation will stay around 2 percent to 2.5 percent.

This outcome, however, does require more support from policy makers. While “big stimulus packages” are now history, Beijing could deploy temporary increases in fiscal spending, targeted cuts in reserve requirement ratio, new supplementary lending, as well as support for consumption and investment.

Structurally, China is in a transformation to a post-industrial economy, even as it seeks to manage volatile property markets, deleverage in local and regional governments, while easing growth pains with social financing.

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