A leading expert on China’s economy says the country will push infrastructure investment next year in order to foster GDP growth, lifting the outlook for the global resources sector.
The Australian reports that Wang Tao, UBS’s head of China economic research, predicts that the country’s economic growth rate will rise to 8% next year from 7.6% this year.
According to Wang the two key drivers of the output gains will be infrastructure and property, both of which will raise demand for commodities such as iron ore and copper:
We are looking for the growth to be led by stronger infrastructure investment but also a modest recovery in property. So that means that even though total fixed investment is not much stronger than this year, they are going to be slightly more commodity intensive.
Beijing has already increased infrastructure spending over the past several months, while a rebound in the property market should foster an increased number of project starts.
Wang expects exports to remain stable and for China to enjoy a soft landing as it returns to a “modest recovery path.”
Despite the salutary effects of increased spending on infrastructure and property in the short-term, such measures fly directly in the face of the conventional wisdom concerning the current state of the Chinese economy, which experts say suffers from insufficient consumer spending, wasteful spending on superfluous infrastructure projects and a looming real-estate bubble.