SMEs to push China's growth above official target: S&P

 Official economic projection is 7.5 per cent.

China's economic growth above 8 per cent per annum in the past eight years has been the major factor to sustain Asian economies and the globe, amid crises in the US and Europe.

 According to a report titled, "A Less Fiery Dragon Year For China", S&P said that China's growth in 2012 will continue to stand out among the world's largest economies, despite potential adverse developments globally. Chinese local governments' penchant for growth and policymakers' increasing support to small and mid-size enterprises (SMEs) will fuel growth.
 "We believe local and regional governments are already promoting local economic activities in ways that do not attract public attention," said Standard & Poor's credit analyst Kim Eng Tan. "These activities could include increased investment incentives and greater ongoing subsidies to offset higher power tariffs implemented in late 2011."
 The report says that economic policy easing in 2012 is likely to come most prominently from the government budget, with consumers and SMEs most likely to benefit. The government is implementing tax reductions and greater social transfers in its national budget this year. The increase in budgetary transfers should boost household consumption directly by putting more cash in consumers' hands. Helping SMEs also supports consumption indirectly as these smaller firms together employ more than half of China's total urban workforce.
 But potential adverse developments in the European Economic and Monetary Union and the Middle East could threaten China's growth. Despite the European Central Bank's liquidity support to banks, the region's governments would likely have to rely on structural reforms to bring back longer-term economic and fiscal stability. Major missteps can still trigger another spike in tension and loss of investor confidence. Meanwhile, if tension escalates sharply over Iran, oil supply disruptions could send prices rising back to record levels. For China, a net importer of crude oil, there are likely to be negative economic and fiscal consequences.