Analysts expect stronger Chinese economy

Despite data showing signs of weakness, some analysts say the Chinese economy could grow stronger by the year's end.

Growth in China's GDP has slowed for six consecutive quarters, hitting a three-year low of 7.6 percent in the three months ended June 30.

With third-quarter data to come this month, some see a bottoming-out already under way.

"Since February, I have an idea that the Chinese economy is in a soft landing. Its overall development has been stable," said Dan Steinbock, head of international-business research at the India, China and America Institute, which is affiliated with Georgia's Kennesaw State University.

Further softening is seen in exports, on which the Chinese economy is heavily dependent. Trade data for August showed that exports rose at a slower-than-expected rate of 2.7 percent from a year earlier, due to weakened overseas demand.

China's stock market has also been dragged down by reduced manufacturing output and the gloomy sentiment worldwide. The bourse in Shanghai hit a post-2009 low in September.

But as Steinbock sees it, the long-term growth potential for China means it won't be hit as hard as other economies.

"China is a large emerging economy; it's where the United States was in the 1920s," he said.

The nature of the US economy, and that of many European countries, makes for a more difficult path to return to economic levels preceding the financial crisis of 2008-09.

Growth in China's real, or inflation-adjusted, GDP may turn out to have rebounded in the second half of 2012 - around 8 percent to 8.4 percent on an annualized basis, Steinbock said.

While warning that downside risks globally remain high - namely, fiscal wrangling in the US and debt crises in the eurozone - he said long-term growth prospects make China well-equipped to cope with their effects.

Yukon Huang, a senior associate at the Washington-based Carnegie Endowment for International Peace and a former World Bank country director for China, said there is an overemphasis on slower Chinese growth. It isn't necessary for China's economy to keep expanding at its previous pace of 9 percent a year or more, he said.

"Slower growth can be a better thing because it's a higher-quality growth and is sustainable," Huang said.

Annual growth in per capita household income in China has been at least 8 percent, which is the highest rate in the world, the researcher pointed out.

On Nov 8, the 18th Congress of the Communist Party of China will begin, but the leadership transition won't be completed until spring next year, when the First Session of the 12th National People's Congress will be held.

How the transition unfolds could have implications for China's economic development, scholars and analysts say.

According to Huang, China's current leadership is under some pressure to achieve a "soft landing" for the economy.

"They realize they cannot overstimulate the economy or do anything excessive," he said. "It's a problem, but it's a problem that will go away. The best thing they can do is to make sure there is enough liquidity in the market but not go for an excessive increase in investment."

Ann Lee, an instructor at New York University and author of What the US Can Learn From China, said the manufacturing slowdown is a good thing. China's 12th Five-Year Plan (2011-15) is based partly on a strategy of focusing less on manufacturing and exports, she said. Wages in China have been rising by double-digit percentages for several years, as has growth in consumption, Lee added.