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Outlook for China’s Economy in 2014 and Implications

Author Lee, Won Kyo Date 2014.02.25 Issue No 579
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Regarding the economic growth target for China this year, the reform?based view which claims 7% growth, is conflicting with the growth-based view which pursues 7.5% growth target.

 

Chinese government is expected to take a strong reform measure to improve the fundamental of Chinese economy by giving consideration to the criticism of side effects caused by the massive stimulus package Chinese government has pushed forward since 2008.

 

Due to the reform measures and weakened growth engines in individual sectors, China’s economic growth rate is expected to remain more or less than 7.4%.

 

Because of the strengthened management of local government debt, the Chinese local governments which have been main investment bodies in China, would undergo lessened investment capacity.

 

As the effect of anti-corruption policy has been persisting for 2 consecutive years since last year, the level of consumption would stay at the same level of the previous year or be slightly slowed down.    

  Volatility in emerging financial markets caused by U .S. quantitative easing, as well as price-rise pressure such as appreciation of yuan and the rise in workers’ wage, would limit the export growth rate of China.   

 

Once the slowdown in China’s growth becomes exacerbated more than in the previous year, this would have a relatively significant effect on the Korean industries such as display, semiconductor and petrochemical sectors.  

 

Not only that, it is concerned that Korean enterprises located in China could be confronted with deteriorating business environment.

It is required to respond to a shift in China’s growth strategy, and establish a strategy to target Chinese domestic market. 

 

It is necessary to find a method to take part in the new urbanization project and environment industrial sectors which Chinese government is putting its emphasis on.

 

It is crucial to make inroad into the mid-western regions in China which are still rapidly growing, and set a stage for the penetration into Chinese domestic market through the establishment of Korea- China FTA