Stable GDP growth expected in 2014

The real GDP growth of China in 2014 will remain stable but mildly slow to 7.2 percent year-on-year, partly due to higher inflation, a report from Coface said on Friday.

The lower government GDP growth target for 2014 is representative of the government's intention to accelerate reform efforts. Exports and investment are expected to improve in light of global recovery.

Acceleration of urbanization and better local government debt (LGD) management were two key themes in a communique from the Central Economic Work Conference.

It is expected that the government will address encouraging infrastructure investments — particularly for building "networks of cities" in the midwestern and northeastern regions — by the private sector. As the government has already indicated fiscal policy would remain stable, the funding for these projects should come from the private sector.

Rising lending cost is an aspect to be watched for in 2014. With lending rate liberalization introduced in July 2013, banks' lending will become more market-based and tightness in the interbank market will translate into higher lending rates.

Liquidity could become even tighter as many corporate bonds and much local government debt will be required to fulfil their repayment obligations in 2014.

The weighted-average lending rate in China been picking up slowly in 2013, and such a trend should extend to 2014 given the market conditions. That will be more worrying for small and medium enterprises that, traditionally, do not receive abundant credit facilities from banks, the report said.