China's GDP growth might fall to 4%: Robert J Shapiro

Says China has created an enormous amount of credit for fundamentally inefficient state-run enterprises

While India is worried about a low growth rate of 5%  in 2013-14, the gross domestic product (GDP) expansion in China might be as low as 4% in the coming years, according to Robert J Shapiro, a renowned economist.

Shapiro, who has advised the likes of former US President Bill Clinton, former US Vice-President Al Gore, British Prime Minister Tony Blair, said: "One would expect that growth in China would slow to 4% over an extended period."

He was speaking at the second edition of The Growth Net series of debates on economy and development here on Monday.

When questioned why he is so sure that China's growth rate could decline to 4%, Shapiro said that is what all indicators suggest.

Shapiro is the chairman and co-founder of Sonecon, LLC, a private firm which provides economic advice and analysis to senior officials of the US and foreign governments as well as businesses.

Elaborating his theory, Shapiro said China has created an enormous amount of credit for fundamentally inefficient state-run enterprises, which can't be recovered. Now it is trying what is called "soft landing".

He said China has insulated itself from the crisis in the US and Europe, but these distortions don't go away. "We have seen significant slowdown in China."

China's full-year growth in 2013 was 7.7%, which was a tad higher than market expectations for a 7.6% expansion, which would have been the slowest since 1999.

According to government data, China's manufacturing growth fell to an eight-month low in February, mirroring further weakening in the economy. According to China's National Bureau of Statistics, the purchasing managers' index (PMI) plunged to 50.2, the third straight drop since November 2013.

A figure over 50 indicates expansion, while one below that shows contraction.

India's economic growth, on the other hand, crashed to a decade-low of 4.5 per cent in 2012-13; it is projected to expand a bit to 4.9 per cent in 2013-14.

India exported goods worth $13.53 billion to China in 2012-13, constituting 4.51 per cent of the former's total outbound shipments. On the other hand, it imported goods worth $52.25 billion, accounting for 10.65 per cent of India's total inbound shipment.