China Lowers 2012 GDP Growth Target to 7.5%

China, the world’s second largest economy, lowered its GDP growth target to 7.5 percent this year, marking the first time the figure has dropped below 8 percent in the past eight years.

China aims to increase its GDP by 7.5 percent, boost the volume of total exports and imports by roughly 10 percent, and hold consumer price index (CPI) increases to around 4 percent, Chinese Premier Wen Jiabao said in his “Report on the Work of the Government” presented to the National People’s Congress on Monday.

The slower growth rate is in line with global expectations and reveals China’s awareness of the need to rebalance its economy. The country currently relies heavily on exports and investment for its economic development, but has begun to find such an economic model no longer sustainable due to surging labor costs and a lack of innovation (which leads to low investment returns).

“…in settling a slightly slower GDP growth rate, we hope to make it fit with targets in the 12th Five-year Plan, and to guide people in all sectors to focus their work on accelerating the transformation of the pattern of economic development and making economic development more sustainable and efficient, so as to achieve higher-level, higher-quality development over a longer period of time,” Wen stressed in his speech.

China’s 12th Five-year Plan released one year ago aimed at an average annual growth rate of 7 percent between 2011 and 2015, a 0.5 percent correction down from the development goal set in the country’s 11th Five-year Plan.

A recent report named “China 2030” – prepared by the World Bank and the Development Research Center under the Chinese State Council – said China has reached a development “turning point” and should use the right timing to conduct deep reforms.

“China could postpone reforms and risk the possibility of an economic crisis in the future or it could implement reforms proactively,” says the report.

Beijing’s acceptance of a lower growth target is also interpreted as a measure to manage international expectations. While the debt-ridden Euro zone still expects China’s rescue in cash, and the United States in an election year continues pushing the RMB value to rise, China’s own headwinds may give the country less external pressure and offer a breathing space for domestic exporters.

This article was written for the China news site, China-briefing.com.

Dezan Shira & Associates specialise in foreign direct investment in China, and maintain accountants in Shanghai, Beijing and other major cities.

AmCham South China 2012 Special Business Report

The American Chamber of Commerce in South China launched its annual “2012 Special Report on the State of Business in South China” as well as its “White Paper” covering the business environment across China on February 28, 2012.

The special report, released for the past seven consecutive years, details the results of a survey conducted by AmCham South China among the association’s members with the aim of reporting the pulse of the current economic situation throughout the region. Additionally, the report presents in-depth economic overviews of Guangdong, Fujian, Guangxi, Hainan, Hong Kong and Macau provided by the foreign investment consulting firm Dezan Shira & Associates.

AmCham South China estimates that its members will reinvest a minimum of US$ 10 billion over the course of this year and notes that 85 percent of study participants consider the business environment to be good, very good or excellent. Furthermore, the Chamber estimates that its member companies hired approximately 544,000 new individuals over the course of 2011.
This year, 461 companies participated in the study – answering multiple questions of interest in the following areas:
– Company demographics
– Revenue and profitability
– South China
– Investment trends
– South China’s business environment

Meanwhile, this year’s “White Paper” offers a summary of China’s impressive accomplishments since the “opening up” and examines the key influences affecting the business environment in present-day China; such as national policy initiatives and the global economic crisis.
Areas of interest in this year’s report include:
– Regulatory challenges
– Legal developments in China related to intellectual property rights
– Suggestions for improvements
– Industry profiles
– Regional overviews

Both the “2012 Special Report on the State of Business in South China” as well as the “White Paper” are immediately available as complimentary PDF downloads on the American Chamber of Commerce in South China’s official web site.

This article was written for the Business site, China-briefing.com.

Dezan Shira & Associates specialise in foreign direct investment in China, and maintain accountants in Shanghai, Beijing and other major cities.