China's economy unlikely to make hard landing: report

HONG KONG, Oct. 6 (Yonhap) -- Despite fears over a global recession, the Chinese economy is unlikely to make a hard landing this year as the country's fiscal health remains strong, a report said Thursday.
Concerns have recently grown that the export-driven Chinese economy, the world's second-largest, could be affected by fading demand in the United States and Europe struggling with debt problems.
"Chinese policymakers would likely respond quickly to an external recession through expansion of monetary and fiscal policies and a reversal of housing policies, which we would expect to be supportive of investment and commodities," Barclays Capital analyst Huang Yiping said in a report.
"The ultimate test for China lies with fiscal sustainability. For now, we believe the government still has enough room to stretch policy to prevent a systemic meltdown of the economy."
While the investment bank expected a soft landing led mainly by an investment slowdown, downside risks from the situation in Europe and in China itself are increasing, it said.
"We think benchmark interest rates will likely be on hold and the yuan will continue to strengthen at a relatively fast pace, while 'selective easing' may help reduce financing pains for small and medium enterprises, property developers and local governments," Huang said.
Huang added that even a full-blown fiscal and financial crisis in China is unlikely, as the world's No. 2 economy has relatively healthy balance sheets.
In the first quarter of 2011, China's economy grew 9.7 percent, slightly down from the 9.8 percent expansion during the same period a year earlier. For all of 2011, the economy is forecast to grow in the 9 percent range, compared to a 10.3 percent increase last year.
Beijing said it is seeking to contain its economic growth in the 8 percent range amid mounting concerns that the overheating Chinese economy is driving the country's high inflationary pressure.