Options wide open for sustaining steady growth

Source:Xinhua Published: 2012-7-31 18:37:06

China has enough gas in the tank to steer its economy toward steady growth amid current adversities stemming from thwarted investment and withering exports, experts said.

As the country's economy slows, the world at large has been closely watching for when the global economic powerhouse will get back on the track of buzzing growth.

China's economy expanded 7.6 percent year on year in the second quarter of 2012, slowing from 8.1 percent in the first quarter, the National Bureau of Statistics said this month.

The growth rate marked the sixth consecutive quarter of decline and was the slowest pace since the first quarter of 2009.

Zhang Liqun, a researcher with the Development Research Center of the State Council, told Xinhua Tuesday that a raft of measures taken by the government have shown their effects, and the economy will stabilize and get out of the current slowing.

Earlier this year, China pared its gross domestic product growth target for 2012 to 7.5 percent from 8 percent in the face of a persistent slump in the United States and spreading debt woes in the European Union.

To buoy the economy, China has adopted a string of pro-growth measures, including lowering banks' reserve ratio to boost lending, subsidizing energy-saving household electrical appliances and speeding up approval for major construction projects.

Zhang said China's policy shifts have effectively prevented risks of financial debt as well as inflation, providing ample room for its macroeconomic policies to stabilize growth.

China's Consumer Price Index (CPI), a main gauge of inflation, eased to a 29-month low of 2.2 percent year on year in June, leaving the government ample room to introduce more pro-growth measures to boost the slowing economy.

"At present, the most pressing task for China is to make a steady transition from an annual growth rate of around 10 percent to 7 to 8 percent," Zhang said.

The transition will help create an environment for economic transformation and the reform and upgrading of enterprises, and it will be conducive to unleashing the country's growth potential, Zhang said.

"China should closely monitor changes to situations at home and abroad and continue to push ahead the implementation of its pro-growth policies to enable the steady transition toward growth of 7 to 8 percent," Zhang said.

Li Daokui, head of the Center for China in the World Economy (CCWE) under Tsinghua University and a former central bank advisor, said the country's economy is "showing healthy signs of stabilization."

"We are confident that China will see U-shaped economic recovery in 2012," Li said.

China's urban fixed asset investment rose 20.4 percent year on year in the first half of this year, 0.3 percentage point higher than the growth registered in the first five months.

China's customs authority said its exports rose 9.2 percent to 954.38 billion US dollars in the first half, 1.6 percentage points higher than the first quarter.

Preliminary figures from the HSBC purchasing managers' index (PMI), which gauges the manufacturing sector, rose to a five-month high of 49.5 in July.

The CCWE forecast that the country's GDP will grow by 8.4 percent this year, according to a report on China's economic situation released early this month.

The International Monetary Fund (IMF) said in a report last week that China's economic growth would slow to about 8 percent this year and then rise slightly to 8.5 percent in 2013.

China's economy may be experiencing a soft landing despite growing global headwinds, and China is positioned to respond to a possible deterioration of the external environment, the IMF said.

Li said that as the country's economy stabilizes, the government should not adopt a massive stimulus plan like the one implemented after the 2008 financial crisis, but only make appropriate adjustments to its macroeconomic policies.

"Seeking steady growth should be combined with pushing forward reforms, especially the reform of the financial system, and taking concrete measures to boost private enterprise investment," Li said.

China should also focus on economic restructuring in its pursuit of steady growth by supporting more efficient industries and phasing out outdated production capacity, he said.

Stabilizing growth should also be combined with improving people's livelihood. The country should boost investment in public investment projects, such as water conservation and disaster-relief projects, Li said.

"To seek steady growth amid adversities, China should focus on promoting reforms, accelerating economic restructuring and improving people's livelihood," according to Li.

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