China officials see growing global risks in 2013

Last Updated: Fri, Nov 16, 2012 05:50 hrs

China faces growing global economic risks in 2013, with the looming fiscal cliff in the United States, Europe's debt crisis and rising trade tensions all threatening growth in the world's second-biggest economy, senior officials warned on Friday.

On Thursday, China unveiled the new leaders who will take charge of the world's most populous nation for at least the next five years. China's own economy is showing signs of recovery after seven successive quarters of slowing growth that leave it on course for its slowest full year of expansion in 13 years.

"Uncertainties in the global economy will increase further in 2013, especially in Europe and the United States - China's largest export markets," Vice Finance Minister Zhu Guangyao told a financial forum in Beijing.

He cited the recent IMF forecast that the fiscal cliff in the United States - shorthand for budget cuts and tax hikes that could take effect next year - could amount to $800 billion and cut could U.S. economic growth by 4.8 percentage points in a worst case view.

"It could drag China's economic growth down by 1.2 percentage points," Zhu said, adding that he hoped Washington lawmakers would come to an agreement on taxes that would keep the U.S. economy on track.

"Otherwise, U.S. growth could slip into a deep recession, which is a disaster for the United States, and also bring a severe negative impact on the global economy," Zhu said.

He reaffirmed China's support for the euro zone's efforts to deal with its debt crisis and revive the bloc's economy.

"I think it is urgent. Time is limited," Zhu said.

Chinese leaders have repeatedly pledged to help solve Europe's debt crisis, which has dented demand for Chinese exports and weighed on its economy.

Wu Xiaoling, a senior lawmaker and former vice central bank chief, said China faces rising trade protectionism as the global economy struggles.

"We need more trade to help the recovery from the (global) crisis, but trade protectionism is on the rise and nationalism is on the rise," she said.

She said that China's must press ahead with market-based economic reforms and political reforms to help sustain long-term economic growth.

Economists say the seven-quarter long cyclical downturn in China's growth ended in the third quarter, when growth dipped to 7.4 percent year-on-year. A tepid rebound to 7.7 percent is anticipated in the fourth quarter but full-year growth remains on course for its slowest year since 1999.

Jin Liqun, chairman of the supervisory board of the country's $482 billion China Investment Corporation sovereign wealth fund, said integration of the global economy meant that China had to remain on its guard.

"We should be prepared for surprises," Jin said.

He said downside risks to U.S. growth from the fiscal cliff could cap expansion of the world's biggest economy at just 1.6 percent in 2013 and that the failure of the European Union to deal with its debt crisis was damaging for the world.

"The current strategy is leading us up a blind alley," Jin said of efforts so far by European policymakers to solve a sovereign debt crisis that has festered for three years.

"The euro zone needs to strike a proper balance between austerity and growth," Jin said.

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