China economy to underpin global demand in 2013: CIC

Sat Jan 26, 2013 1:23am EST
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By Kevin Yao

BEIJING (Reuters) - China's economy could grow at more than 8 percent in 2013, giving some underpinning to global economic activity that is set for a mild, tortuous recovery this year, the head of China's sovereign wealth fund said on Saturday.

"China's economic growth could be over 8 percent this year. China's economy supports a very large part of global demand," Lou Jiwei, chairman of the China Investment Corp. (CIC) CIC.UL, told a forum.

China's economy expanded an annual rate of 7.9 percent in the fourth quarter of 2012, snapping seven consecutive quarters of weaker growth, as a raft of pro-growth policies kicked in.

The Q4 bounce helped lift full year growth in the world's second biggest economy to 7.8 percent which, though China's slowest pace for 13 years, generated roughly a third of global economic growth of 3.2 percent - itself the worst since the 2009 financial crisis and just barely above the 3 percent mark economists say signals a worldwide recession.

Lou said that even if China's growth did accelerate further in 2013, increased financial market volatility caused by Europe's debt crisis and concerns about the U.S. fiscal position, left the world economy set for a "mild, tortuous and slow recovery" at best.

Problems in debt-constrained countries, though, meant opportunities for cash-rich China, Lou said, adding that the government should encourage local firms to step up their efforts to expand and invest abroad.

"There are big opportunities for countries with cash on their hands, especially for China. We should grasp the opportunities and give firms more freedom in investing overseas," he said.

China has accumulated the world's biggest store for foreign reserves, some $3.31 trillion as at the end of 2012, generated largely as a function of capital controls that have forced Chinese exporters to sell foreign currency to the central bank.   Continued...

The Bund on the banks of the Huangpu River is pictured on a hazy day in Shanghai, September 8, 2012. REUTERS/Aly Song