Dr Michael Haidinger, Chief Sales Officer at Rolls-Royce Power Systems AG; Sami Akeel, Vice President of Sawary Energy, along with other senior company executives pose for a group photo after the signing of agreement. JEDDAH – China's 2014 GDP growth target will probably be the same as last year's, though the actual growth for the year will be closer to the target because this year's economic direction will most likely be one of reform, similar to the final quarter of 2013, supported by proactive fiscal policy, Kuwait-based Asiya Investments, an Asia-focused investment company, said Sunday. This is why China's GDP growth will probably continue to ease in 2014, at the same soft-landing pace, but in return for lower risk and more stable long-term growth. For the whole of 2013, GDP grew faster than the initial 7.5 percent year-on-year target set by the Chinese authorities. The reason China's economy was comfortably above its target was due to the investment-led growth approach evident during most of the year. Although its stimulus impact limited China's chances of an economic hard landing in 2013, it did spread financial risks in the economy. GDP data suggests that the approach undergone throughout most of last year is unlikely to be repeated as drastically this year, signaling the leadership's willingness to take on lower GDP growth in return for more sustainable growth. And late last year, this is exactly what China's leadership claimed. Reforms, such as interest rate liberalization and local government debt regulation, are now expected to be implemented, but the process is a long-term one thus changes are going to take place only gradually. Camille Accad, economist at Asiya who prepared the report, said though in 2011, China experienced a healthy rebalancing of its economy which led to consumption becoming the main driver of growth, however that changed in the first three quarters 2013, wherein GDP growth was not as much consumer base driven, nor was it driven by higher exports. Instead, investment had become the economy's main growth contributor: property and infrastructure investment led to a brief recovery, increasing overcapacity in some industries and financial risk. This is the major reason why economic growth peaked in third quarter. In the final quarter of 2013, China's economic growth fell, as its gross domestic product (GDP) showed when it decelerated from 7.8 percent year-on-year in the third quarter to 7.7 percent in the September - December period. The slowdown was mainly due to the widening contraction in net exports. However, a possible change in trend occurred in the fourth quarter: investment's contribution to growth eased while consumption became a more important driver of growth. Although investment is still the main contributor to growth, the sharp rebound in consumption in the fourth quarter suggests that a change in trend could be taking place. The latest set of macroeconomic indicators show that Chinese authorities are succeeding at managing a soft landing while rebalancing the economy. In line with the fourth quarter GDP, investment in fixed assets (FAI) decelerated to 17.1 percent year-on-year in December, a sign that authorities are taking a less aggressive stance - FAI was growing at 18.2 percent year-on-year in November, and 21.4 percent in August. While FAI has been losing momentum, retail sales continued to grow at a stable pace. In December, retail sales grew 13.6 percent year-on-year, slightly lower than November's 13.7 percent. Industrial production, due to a sluggish external sector, eased further to 9.7 percent year-on-year in December, from 10 percent the previous month. Looking at these data as a whole, we find no evidence of an imminent collapse of the Chinese economy, but signs of a potential economic rebalancing. – SG
