China’s GDP hits three-year low

By Liu Linlin Source:Global Times Published: 2012-7-14 0:20:02

A woman works at a textile factory in Huaibei, Anhui Province on Friday. Chinese exports have suffered from slumping overseas demand. Photo: IC
A woman works at a textile factory in Huaibei, Anhui Province on Friday. Chinese exports have suffered from slumping overseas demand. Photo: IC
China's economy expanded 7.6 percent year-on-year in the second quarter this year, slowing from 8.1 percent in the first quarter and hitting a three-year low, the National Bureau of Statistics (NBS) said on Friday.

The figure took GDP growth to 7.8 percent in the first half, slightly higher than the 7.5 percent full-year target set by the government earlier this year, Xinhua News Agency reported.

Analysts said Friday that there was no need to be overly pessimistic about the statistics since slowdown was a natural trend after 30 years of rapid growth, and the second quarter showed signs of a growth rebound compared with the first quarter.

On a quarterly basis, the country's economy grew 1.8 percent in the second quarter, NBS spokesman Sheng Laiyun said at a press conference.

According to preliminary statistics, the country's GDP grew 7.8 percent year-on-year to reach 22.71 trillion yuan ($3.6 trillion) during the first half, Sheng said.

Li Weisen, deputy dean of the School of Economics at Fudan University, told the Global Times on Friday that slowing economic growth is an inevitable trend in China and it's time for the Chinese government and public to accept this fact.

"Almost all industries in the country are over-expanded and the time for huge investment is gone. The government should work out ways to keep the growth rate steady and not hastily boost investment at this moment," Li said.

Fixed-assets investment, one of the principal drivers of China's economy, grew 20.4 percent year-on-year to 15.07 trillion yuan. The growth rate moderated by 0.5 percentage points compared to that in the first quarter, and was down 5.2 percentage points from the same period last year.

Despite China's GDP hitting a new low, Asian markets rose Friday after the country reported its economy was slowing in line with expectations, quashing fears data would show a "doomsday" scenario of the country heading for a hard landing, according to AFP.

"We should not be too obsessed with 8 percent economic growth. Generally speaking, China's economy has run smoothly during the first half," Sheng said.

Although the economic growth rate continued to slow in the second quarter, it was "rather good" compared with developed nations and other emerging economies, the NBS spokesman said.

Tian Yun, vice president of the Beijing-based China Macro Economics Institute, told the Global Times that after the central government adjusted its policy in April, investment in the second quarter is overall better than expected, especially in the sluggish property market.

"The current monetary policy is very positive and investment in June is growing fast," Tian said. "But I'm not sure whether the trend will stay in a good direction since the US and Europe, China's major export markets, have their own problems to solve."

China has made three cuts in bank reserve requirement since December, reducing the amount of money banks must hold in reserve, aimed at freeing up funds for lending, according to AFP.

The government has also cut interest rates twice since the beginning of June.

Li agreed that export enterprises were facing difficulties, saying they are losing their competitive edge as costs rise.

"Governments can also reduce taxes on small and medium-sized enterprises which shoulder exports in the country. It'll be the best policy to boost their production and at the same time boost growth and consumption domestically," Li said.

Tian also mentioned that the property market continued to be a major problem, and would drag down China's economy in a year or two, while the country's financial system is facing serious challenges as the budget is not enough to support further growth.

Sheng reiterated the government's top priority of stabilizing growth as the country faces increasing downward pressure.

 "The government will give higher priority to stabilizing growth, and continue to strengthen and improve macro-controls to promote steady and relatively fast economic growth," the spokesman said.

Other indicators published Friday showed first-half industrial value-added output rose 10.5 percent year-on-year, down from the 11.6-percent increase seen in the first quarter.

Retail sales increased 14.4 percent from one year earlier in the first half, slower than the 14.8-percent growth registered in the first quarter.

Tian said that China could use the economic slowdown as an opportunity to adjust its economic structure, which could help reduce high energy consumption and high pollution industries.  He was also optimistic that the whole year GDP growth could be maintained at 8 percent this year.

Agencies contributed to this story

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