New book predicts hazy outlook for China

A new book released Thursday asserts that the Chinese economy faces a cloudy outlook, which alerts the market to a -divided landscape in the world economy.

In the wake of the global economic crisis of 2008-10, developed economies, mainly the US, have shown rising signs of improvements, while emer-ging -markets are coming under threat of potential financial risks as the US -Federal Reserves is gradually tapering its -quantitative easing (QE) policy, according to the book titled "The Great Divergency."

Amid the diverging trend, China is equipped with several powerful defensive lines that include massive foreign exchange reserves, continued trade surplus, capital controls and healthy levels of central government debt, Xu Yuanrong, co-author of the book and a research fellow of the International Monetary Institute of the Renmin University of China, said at the book launch held by Renmin University's Chongyang Institute for Financial Studies.

But meanwhile the nation's economic outlook is coupled with concerns such as the risk of a property bubble and ballooning local government debt, Xu noted.

"The risk of a real estate bubble will be the biggest concern for the Chinese economy," he told the Global Times Thursday on the sidelines of the book release event.

In a few Chinese cities including Nanjing, capital of East China's Jiangsu Province, and Hangzhou, capital of East China's Zhejiang Province, developers of new projects have been reducing home prices, according to recent media reports, which Xu believes serves as "a premonitory warning" that the country's housing market may face a murky future.

Data from the National Bureau of -Statistics showed in mid-March that growth in new home prices in 70 major cities saw both a month-on-month decline and a fall on a yearly basis in February, the first time since March 2012.

But there is still tremendous confidence in the Chinese economy, as the Chinese government is well-placed to deal with the problems, said Xu Yisheng, co-author of the book and deputy director of the Research Institute at China Business News, a Shanghai-based financial newspaper.

While some enterprises are under pressure to de-leverage and some industries remain depressed due to -overcapacity, among other problems faced by the real economy, a great deal of opportunities are also opening up for China, for instance, an acceleration of -financial reforms following the -establishment of Shanghai pilot free trade zone, Lisheng Fucha, senior Asia strategist at New York-based Blenheim Capital Management, told the Global Times Thursday at the launch event.