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China's GDP growth could exceed 8.5% next year if other major economies rebound in the second half on the back of Covid vaccination programmes, a senior advisor to the People's Bank of China told MNI in an interview, adding that there was no danger of deflation in the world's second-largest economy.
Chinese exports could surge if OECD countries manage to vaccinate most of their populations by the end of June, said Ma Jun, a member of the PBOC Monetary Policy Committee. Expectations among policy advisors in Beijing for next year's growth range from about 7%-9%.
While some Chinese products which have benefitted from Covid disruption elsewhere would be displaced as western supply chains crank back to life, overall the resumption of growth in the U.S. and Europe would help China's exports, Ma said.
A robust U.S. recovery could also drive a rally in the dollar index, Ma said.
While China's headline consumer inflation turned negative in November for the first time in 11 years as pork prices fell significantly, Ma said deflation was not a concern. Core CPI, which factors out volatile food and energy prices, should remain stable and even rise, he said.
But China's recovery this year has come at the cost of a significant rise in debt levels, meaning that the authorities will have to concentrate on stabilising leverage for some years to come, and on addressing structural issues at the same time as they support economic growth, Ma said.
Concern has also risen in Chinese policy circles about the danger of bubbles in areas such as property and equity markets, with former PBOC governor Zhou Xiaochuan proposing recently that the CPI index could be broadened to include asset prices.
But Ma said the central bank could use macroprudential tools to address issues related to over-leveraging and asset bubbles, while keeping monetary policy mainly for controlling inflation and stabilising employment.