Reforms will ensure economic stability in second half: experts

By Chu Daye Source:Global Times Published: 2018/8/1 23:08:39

Domestic demand ‘a cushion against external forces’

China's efforts to deepen supply-side structural reforms will determine the success of expanding domestic demand, which will in turn help maintain economic stability in the second half of 2018 amid external uncertainties, Chinese experts said on Wednesday.

The Political Bureau of the Communist Party of China (CPC) Central Committee said on Tuesday the economy is on a stable and healthy development track and proactive fiscal policies and prudent monetary policies in the second half of the year will ensure the economy grows within a reasonable range.

The Political Bureau issued an analysis of the economy's performance in the first half of 2018 and drew up plans for the next two quarters, signaling that China will focus on maintaining economic stability in the second half of this year while "external uncertainties" are identified, the Xinhua News Agency reported on Wednesday.

Fiscal policy should play a bigger role in expanding domestic demand, and infrastructure spending in China's economically weak areas should be increased, according to information released by the Political Bureau, which noted the need to maintain control over the monetary supply while keeping liquidity at a reasonable and ample level.

Wan Zhe, chief economist at the International Cooperation Center of China's National Development and Reform Commission, said there is a broad policy shift that will be more targeted at fixing structural issues.

China's economy expanded 6.8 percent in the first six months of the year and is likely to meet the annual target growth rate of around 6.5 percent, according to Xinhua. Economists believe it will remain within a range of 6.7 to 6.9 percent  as it has for the last 12 quarters.

On the downside, weaken industrial output and investment were spotted in June, and escalating global trade tensions have cast a shadow on exports. The Political Bureau also called for fast-tracking new opening-up policies and easing market access for foreign capital.

"In some sectors, implementation of policies is lagging behind as China shifts from high-speed growth to high-quality growth," Wan said, noting that the market is more demanding than ever and requires more skillful policy implementations.

Public service spending

Analysts generally believe that additional infrastructure spending in the second half of the year will reverse the weak data recorded in the first half.

Cong Yi, an economics professor at the Tianjin University of Finance and Economics, told the Global Times on Wednesday that successfully expanding domestic demand would provide a cushion against negative external factors, secure employment and ensure wage increases.

New investment should be focused on economically "weak areas," instead of real estate development and urban construction projects, said the Political Bureau.

"It will be less about railways, expressways, and airports, and more focused on China's underperforming public services such as much-needed hospitals and schools," Cong said.

In the ongoing Beijing-Tianjin-Hebei integration initiative alone, demand for investment in public services could be well over 10 trillion yuan ($1.47 trillion), said Cong, adding that continued supply-side structural reforms will determine if domestic demand can expand. "The government must regulate its role and refrain from the desire to profit from such projects or erect barriers to private investment."

The Political Bureau also showed a firm resolve in regulating the property market, saying that "increases in home prices should be firmly curbed and a long-term mechanism to ensure the sound development of the industry" needs to be more quickly developed.

Posted in: POLITICS

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