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China’s growth prospects depend on pace of reform - NAB

FXStreet (Barcelona) - Economists at the National Australia Bank view the transition away from an investment based economy to likely to be challenging for China as it entirely depends on the effectiveness of policy implementation by the Chinese government.

Key Quotes

“The Government also announced a broad economic target at the Third Plenum, aiming to double the size of China’s economy between 2010 and 2020 – equivalent to an annual average growth rate of 7.2%."

"Given that China’s growth rate is currently slowing – we forecast annual growth of 7.3% this year and 7.0% in 2015 – this target already appears to be challenging.”

“The transition away from an investment based economy is likely to coincide with a slower trend growth for China (albeit growth that is likely to be far more sustainable). The smoothness and pace of this transition will largely depend on how effectively China’s Government can implement reform."

"Progress to date has been modest – but largely in line with our expectations – but the need to improve competition and liberalise financial markets is slowly becoming more urgent.”

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