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China Briefings

Reports on China issued by Samsung Economic Research Institute

2012 Outlook for China’s Economy

2012 Outlook for China’s Economy

Samsung Economic Research Institute Beijing Office

Dec. 28, 2011

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In the first three quarters of 2011, China’s overall economy remained stable, but inflationary pressure increased. Economic growth decelerated slightly partly due to tightened monetary policy and a decline in exports and fears over a US double-dip recession. The latest inflationary bout may have peaked but prices will remain high over the foreseeable future.

In terms of major indicators, consumption has recorded slow growth, as declining purchasing power and consumer sentiment due to high inflation restrained consumption, which had been stimulated with fiscal and tax support. Investment in fixed assets and real estate development continued high growth, yet slowed considerably. Meanwhile, growth of foreign trade has slowed due to sluggish foreign demand and price increase in China.

In 2012, China is expected to see softer economic growth in general, with the economic growth rate sliding from 2011 to 8.4%. The effects of economic restructuring are minimal, as proven in the fact that investments are still the main growth driver. Also, consumption is likely to slow while exports will stabilize before a rise.

Inflation is expected to fall in the first half of 2012 and then rise in the second half of the year, putting the annual inflation rate over 4%. Rising labor costs will increase wage pressure on companies. The yuan is forecast to slowly appreciate against the US dollar or lose ground against the dollar for a certain period of time.

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