Consumer spending predicted to fuel growth

As people have showed tremendous enthusiasm for travel and leisure spending during the past Golden Week holiday in China, analysts are predicting consumption to fuel economic growth when manufacturing is showing weakness.

During the holidays, 119 domestic tourist attraction sites had received 34.3 million visitors since September 30, up 20.96 percent year-on-year, according to a statement posted on the government's official website Sunday.

The tourism revenues totaled 1.77 billion yuan ($279 million) during the eight-day holiday starting September 30, up 24.96 percent year-on-year, the official statistics showed.

"We believe worries about a hard landing are overdone in the market right now. Strong tourism data (the number of tourists is up 23.4 percent year-on-year) for the first four days of the eight-day holiday lends support to our soft-landing views," Lu Ting, a China economist at Bank of America-Merrill Lynch, wrote in a research note Thursday.

The manufacturing purchasing managers index, a gauge of manufacturing activities, picked up by 0.6 point from August to 49.8 in September, the first rise in four months, yet still below the 50 mark, indicating contraction, according to official statistics.

The US investment bank Goldman Sachs forecast earlier that China's long-term growth rate would fall to a range of 7.5 to 8.5 percent from the double-digit pace recorded between 2004 and 2007.

Growth in real terms slowed to 7.8 percent year-on-year in the first half of 2012 in China from 9.2 percent in 2011. "We should note that growth deceleration is not equivalent to recession, and the 7.8 percent growth pace is still one of the highest in the world," Lu said.

"Growth will slow further in the second half of 2012, but will most likely stabilize at around 7.4 percent year-on-year," Lu said.

"Tourism data also point to a shift of consumption toward leisure, a new source of demand," he said.

China may have already started rebalancing the economy by replacing the old growth model with a consumption-led one this year, Michael Pettis, a finance professor at Peking University, wrote in a newsletter sent to the Global Times.