China’s economy expanded last year at 7.8pc – its slowest pace in more than a decade – raising concerns considering possible rebound in the country’s growth is losing steam.
However, the Organization for Economic Co-operation and Development predicts in a new survey of China’s prospects that the country’s economy could expand by 8.5pc this year and by 8.9pc in 2014.
After allowing for price differences, China could become the world’s largest economy, overtaking America, around 2016, the OECD claims.
Fuelling this positive prediction was an optimistic outlook for investment spending in the world’s second-biggest economy, The Telegraph writes.
It is explained by substantial deficits in rail and road capacity when compared to other major economies at similar stages of development, as well as to sub-standard housing as offering scope for more profitable spending on infrastructure.
However, to keep economic growth on the high level, the think tank urged China to make good on pledges to encourage state companies to enter competitions on more open markets and ease movement of migrants into cities.
“Those forecasts definitely look bullish, even a bit higher than average market expectations,” Win Thin, global head of emerging-markets strategy at Brown Brothers Harriman & Co. in New York, told reporters. “There is no major risk in the Chinese economy.”
Chinese leaders have promised since 2005 to open industries to private competition, “and really there has been no result,” said Richard Herd, the chief author of the OECD’s report.
“What’s needed is to make these changes effective and really open up some of these sectors,” Herd said at a news conference.
Other advisers including the World Bank confirmed that China could face a steep decline in growth in case it fails to reduce the dominance of state companies in industries including energy and finance.
“China has weathered the global economic and financial crisis of the past five years better than virtually any OECD country and than many other emerging economies,” said the OECD.
“It is well placed to enjoy a fourth decade of rapid catch-up and improving living standards,” the tank added. However, it did point to risks such as property prices and potential tension arising from social inequalities and an ageing population.
“China’s current GDP is officially $8.25 trillion, though it’s estimated to be much greater when adjusted for purchasing parity, making $12.38 trillion more accurate, which is third in the world behind the EU ($15.70 trillion) and the U.S. ($15.66 trillion), according to the International Monetary Fund,” reports The International Business Times.
“Per capita GDP for China is $9,100, which ranks the nation at a dramatically different 118th place in the world. The U.S. is ranked 12th in the world in terms of per capita GDP at $49,800.”
OECD’s 2016 projection is significant as the IMF estimates that China will overrun the U.S. by 2017, when the U.S. GDP will reach $19.70 trillion compared with China’s $20.33 trillion.