With so many questions about debt issues in the world’s biggest economy, the globe’s second biggest economy is painting a more upbeat picture on its prospects and expressing confidence it will avoid a hard-landing scenario.

China's economic growth should exceed 7.5 per cent this year, deputy central bank governor Yi Gang told a seminar last week, quoted by the Xinhua news agency. The Chinese economy has continued to grow, but the rate of expansion has shrunk in 12 of the past 14 quarters. However, that is now showing evidence of stabilising.

"I think for this year we're going to have certainly above 7.5 per cent growth rate, maybe 7.6 per cent something like that," Yi told a seminar on the global economy hosted by the International Monetary Fund in George Washington
University. Economic data in the third quarter showed China's economy had already picked up, he said, adding that the problems of shadow banking and local government financial vehicles have been under control.

Double-digit growth
He now believes the Chinese economy is entering a phase of medium-to-high rate growth, maybe at around seven per cent in the foreseeable future. While this is some way off the double-digit growth rates of the past decade, it's still high by world standards. Third-quarter GDP data is due on Friday and the analysts are forecasting an increase in the pace of growth to 7.8 per cent year on year. Analysts are increasingly sharing this optimistic view.

"The slowing pace of growth, which had long been telegraphed, happened in the first half of 2013 and with growth since stabilising, it appears, thus far, that a soft landing is under way," Christopher Laine, senior portfolio manager and Gaurav Mallik, senior portfolio strategist and portfolio manager at State Street Global Advisers wrote in a research note.

They believe that efforts to rein in real estate prices, curb unregulated lending and allow the renminbi currency to appreciate should not be viewed negatively, given some of the imbalances within the Chinese economy.

Corporate margins will likely remain under pressure, which will reduce the rate of return on new investments, and real labour costs are rising. Both of these changes should slowly begin to increase the consumption share of GDP, the advisers wrote.

'Policy measures'

“These are necessary policy measures and more will surely be needed,” they said.

There are signs of a rebound in key indicators. Passenger-car sales rose at their fastest rate in eight months, up 21 per cent from a year earlier in September, driven by a rebound in Japanese car sales and a rise in demand before the National Day holiday week, when people tend to increase spending.

Overall sales of passenger cars totalled 1.59 million units in September, up from 1.31 million a year earlier, according to data from the China Association of Automobile Manufacturers.

The September year-on-year sales gains also reflect weakness in the year-earlier month when China's territorial row with Japan over the Diaoyu islands took a heavy toll on the world's biggest car market. In September 2012m the nationwide sales of passenger vehicles fell 0.3 per cent overall, but they collapsed 30 per cent and more at Japan's three biggest auto makers – Toyota, Nissan and Honda – which all reported declines of more than 30 per cent, a staggering setback.

The US remains a concern and Yi urged Washington to deal with the federal government shutdown and debt ceiling issues as soon as possible.

“The market doesn’t like uncertainty. We watch this drama very closely,” he said. “I think they should have the wisdom to solve this problem as soon as possible.”