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Economy

Outlooks split on China's future growth

From left to right: Eiji Maeda, Teruo Asada, Yuji Shimanaka, Kazumasa Iwata.

TOKYO -- While recent economic data implies that a further slowdown in the Chinese economy is inevitable, the outlook remains ambiguous, according to participants at an economic panel held at Nikkei Hall in Tokyo on Monday.

     The event was hosted by Nikkei Inc. and the Japan Center for Economic Research, and the panelists were Bank of Japan chief economist Eiji Maeda; Marubeni Chairman Teruo Asada; Yuji Shimanaka, economist at Mitsubishi UFJ Morgan Stanley Securities; and JCER President Kazumasa Iwata.

     Asada, speaking from the experience of his recent business trips to various parts of the world, said that in his view, "China's economy seems awfully bad." Although government support via financial and monetary policies continues to reduce the pressure on its slowing economy, China's economic situation is still weakening. "Rail transport, crude steel production and real estate sales don't show as strong growth as before," Asada said. Shimanaka said that China is already in a recession.

     Iwata, who also sees China's economic slowdown as unavoidable, put its potential annual gross domestic product growth at around 5-6%, explaining that China is in the midst of a transition to a consumption-led economy. While government support is expected to ease the slowdown of the Chinese economy, there could be gaps between the official and real growth rates.

     On the outlook for China's economy, Shimanaka said he believes that with the support of the government, "the economy will pick up after all, even if growth declines in the April-June quarter."

     Meanwhile, the global economy is forecast to maintain its moderate growth, mostly led by emerging countries and members of the Assiciation of Southeast Asian Nations. In particular, "India will stay on the bright side," said Iwata. Though that country's government estimates 7.8% growth, "it will go beyond that, most likely reaching 8% this year," Iwata added.

     The weak yen and cheap crude oil have been a tailwind for the Japanese economy to recover moderately. Japan's trade balance in March shifted to a surplus for the first time in almost three years, helped by a decline in import value, mainly due to cheap oil. Investment and services are playing an increasingly large role in boosting Japan's growth, and its travel balance recorded a 209.9 billion yen ($1.75 billion) surplus in fiscal 2014, the first in 55 years. The weak yen bolstered the ongoing tourist influx into Japan; the number of Chinese in particular has been seeing a large boost, Iwata said.

    However, the long-term sustainability of Japan's growth remains unclear, with the planned rise in the consumption tax in April 2017 expected to be a hitch amid the shrinking population. For Japanese businesses to attain growth in the long term, "Japan needs to globalize internally. It is crucial to bring foreign people, products and money into Japan," Asada stressed. Deregulation by the government for structural reform is one way to attract foreign investment, and Asada also urged a change to Japan's mindset, saying, "We should aim for growth not only of Japanese corporations, but of foreign countries and businesses as well."

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