China faces uncertain demand, overcapacity

BEIJING • China's economy faces risks from international uncertainties and excess factory capacity this year, the country's statistics bureau said yesterday.

The world's second-largest economy grew 6.7 per cent last year, easing from the previous year's pace, but within the government's target growth range of 6.5 to 7 per cent.

But even as China's exports are finally showing signs of recovering after a multi-year slump, the outlook for global demand is being clouded by a feared rise in trade protectionism in the United States.

"The international situation is still complex and volatile, there are still many uncertainties and there are contradictions between domestic overcapacity and structural upgrading," said Mr Li Xiaochao, vice-head of the national bureau of statistics, in a statement.

Mr Li pointed to the problems of deep adjustments of the world economy, weak global trade and reversing globalisation.

China far exceeded its targets to reduce bloated industrial overcapacity last year by forcing the closure of many inefficient steel plants and coal mines. It has earmarked further reductions this year, though market watchers say much of the outdated operations are being replaced with leaner and cleaner ones, doing little to reduce overcapacity and the threat of oversupply.

Mr Li also said that maintaining mild inflation will be favourable for China's economy, as price pressures start to build again globally after years of weakness. Consumer inflation accelerated to 2.5 per cent in January from a year earlier, the highest for a month since May 2014, while producer price inflation accelerated to 6.9 per cent, the fastest since August 2011, as a construction boom fuelled demand for materials from steel to cement.

About 57 per cent of the 1.38 billion mainland Chinese population lived in towns and cities at the end of last year; the urbanisation rate rose 1.25 percentage points from a year earlier. The government hopes that 60 per cent of the country's population will be urban residents by 2020. China's working-age population numbered 907.5 million at the end of last year, down 3.5 million from a year earlier.

REUTERS

A version of this article appeared in the print edition of The Straits Times on March 01, 2017, with the headline 'China faces uncertain demand, overcapacity'. Print Edition | Subscribe