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Heading for Stable Growth
Improved economic structure and greater benefits for the people usher in a new direction for China's economy
By Deng Yaqing | NO. 30 JULY 23, 2015

 

 The construction site of a PPP (public-private partnership) project in Nanchang of Jiangxi Province on February 8 (XINHUA)

China's GDP growth leveled off at 7 percent in the first half of this year, with an array of optimistic signs, such as better structure, improved growth quality, faster-than-expected job creation and accelerated growth of residents' income, boding well for the ongoing reform.

To stabilize economic growth, the Chinese Government unveiled a number of policies and measures, ranging from launching key infrastructure projects to remolding the investment and financing system, from lowering the reserve requirement ratios and interest rates to promoting tax cuts, from encouraging innovation and entrepreneurship to initiating the Made in China 2025 strategy. "They have begun to take effect, and the national economy is undergoing positive changes," said Sheng Laiyun, spokesman for the National Bureau of Statistics (NBS).

As a matter of fact, some key indicators have stood firm and even shown an upward trend. Total retail sales of consumer goods grew 10.6 percent in June after adjusting for inflation, 0.4 percentage points faster than that in May; exports scored a positive growth of 2.1 percent in June after experiencing a slump in April and May, according to data from the NBS.

Quality growth 

"At present, new growth points are still not powerful enough to completely replace the position of traditional engines, which now are losing their dynamic," Sheng said. He added that the fragile recovery of the global economy added to the downward pressures on the Chinese economy.

"However, the chances are the economy will perform better in the second half of the year," said Sheng, who believes it isn't a question that China will achieve its end-of-year goal of 7 percent.

Substantial progress has been made in the optimization of economic structure. In terms of industrial structure, added value of the service sector made up 49.5 percent of the GDP in the first half of 2015, an increase of 2.1 percentage points from the same period of the previous year.

In terms of domestic demand, consumption contributed 60 percent to the GDP growth, 5.7 percentage points higher than that in the same period of last year.

These changes indicate that China is shifting from a manufacturing- and investment-oriented economy to a service- and consumption-led economy, which is in accordance with the target of its economic restructuring, said Zhu Baoliang, an expert from the State Information Center (SIC).

Improvement was also made in the quality of economic growth. Energy consumption per unit of the GDP fell 5.9 percent year on year, outpacing that in the first quarter by 0.3 percentage points.

The vitality of private economy was further unleashed with more administrative procedures being simplified and power delegated to lower levels of government, said Sheng. In the first half, the industrial value-added output of the non-public economy grew 8.1 percent, 1.8 percentage points faster than the industrial average level, and private fixed assets investment rose by 12.5 percent after adjusting for inflation, accounting for 65.1 percent of total investment.

New industries, new types of businesses and new products have grown by leaps and bounds. Hi-tech industries still maintained a double-digit growth in value-added output, 5 percentage points higher than the industrial average level. In terms of new types of businesses, online retail sales hit 1.65 trillion yuan ($265.65 billion), a year-on-year rise of 39.1 percent. Moreover, some new products, such as robots, new energy cars and railway locomotives, experienced fast growth in output.

 

Workers clear up packages of small commodities ready for export customs clearance at Yiwu Cross-Border E-commerce Supervision Center in Yiwu, Zhejiang Province, on June 3 (XINHUA)

Livelihood boosted 

The gear shift of China's economy doesn't necessarily mean people's livelihood will be affected. In the first half of 2015, the per-capita disposable income of urban residents totaled 10,931 yuan ($1,760), scoring a growth of 7.6 percent in real terms, outstripping the GDP growth. "It, to some extent, reflects structural adjustments and measures targeted at enhancing people's living standards have yielded some results," Cao Heping, a professor from the School of Economics of Peking University, told China News Service.

In recent years, the service industry has witnessed leapfrog expansion, which has provided many employment opportunities and well-paid jobs. The rise of minimum wage in many areas also helps boost the earnings of the low-income population, said Cao.

Meanwhile, the consumer price index (CPI) increased 1.3 percent in the first half, 0.1 percentage point higher than that in the first quarter, well within the whole-year control target of 3 percent.

In some sense, it was a result of a domestic economic slowdown, weak demand and price fall of major international commodities, said Cao, noting that the low price level means people can purchase more goods with the same amount of money.

Buoyant residents' income in combination with well controlled price level indicates that the economic stability has been strengthened and people's well-being been better secured, said Fan Jianping, chief economist of the SIC.

Aside from that, employment was better than expected. In the first half of the year, a total of 7.18 million urban jobs were created, accomplishing 71.8 percent of the full-year target, with the unemployment rate standing at roughly 5.1 percent, according to statistics from the NBS. Behind the propitious employment figures is the rapid development of the producer services industries, said Cao.

Under great downward pressures and amidst the profound adjustment of industrial structure, stable employment is a result of the government's endeavor to promote innovation and entrepreneurship and will ensure social stability, argued Cao.

Good prospects 

The unfinished urbanization and industrialization along with the upgrade of consumption structure will continue to provide a growth impetus, and the efficacy of the newly released policies and measures will be further displayed in days to come, said Sheng.

The public-private partnership project library established by the National Development and Reform Commission in May has recruited 1,043 projects, with total investment amounting to 1.97 trillion yuan ($317.17 billion), and the capital approved in May alone exceeded 250 billion yuan ($40.25 billion). "It takes time for an approved project to be rendered into real investment and productivity," Sheng noted.

"Monetary and fiscal policies, as well as measures to revitalize the property market have not been fully exploited. Therefore, they will continue to fuel the economy in the second half year," said Zhu, who predicted investment, consumption and exports will perform better and play a stronger role in securing a 7-percent growth in the second half.

However, downward risks still persist. Further efforts should be made to stabilize the capital market, tackle overcapacity, bring down financing costs, push forward fiscal reforms and tax reforms as well as financial and state-owned enterprise reforms, and give full play to policies targeted at adjusting supply and demand, said Zhu.

Zhang Jun, head of the information department at the China Center for International Economic Exchanges, noted international factors such as the likely interest rate hike by the U.S. Federal Reserve and Greece's debt problem, as well as domestic factors like the volatile stock market and the deleveraging of enterprises may undermine the upward trend.

"In mid- and long-term, it's still an uphill battle for China to rebalance its economy. In the bottoming out process, uncertainties will rise. The government needs to prevent partial risks from evolving into regional or systematic risks," said Zhang.

Huang Yiping, a professor from the National School of Development of Peking University, argued the prospective rebound of China's economy depends on whether new mainstay industries could come into being through innovation, transformation and upgrades.

"Though the emerging growth engines are not strong enough to bolster the economy, these new industries, products and forms of business represent a hopeful direction for future development," said Huang.

Major Macroeconomic Indicators in H1 

- The consumer price index (CPI), a main gauge of inflation, rose 1.3 percent. The producer price index (PPI), which measures inflation at the wholesale level, contracted 4.6 percent. 

- Foreign trade decreased 6.9 percent to 11.53 trillion yuan($1.86 trillion). Exports increased 0.9 percent to 6.57 trillion yuan($1.06 trillion), while imports dropped 15.5 percent to 4.96 trillion yuan($798.56 billion). 

- Value-added output of industrial enterprises above a designated size--principal business revenue of more than 20 million yuan ($3.15 million) a year--grew 6.3 percent. 

- Fixed assets investment totaled 23.71 trillion yuan ($3.82 trillion), up 12.5 percent after adjusting for inflation. 

- Investment in the property sector reached 4.4 trillion yuan ($708.4 billion), up 5.7 percent after adjusting for inflation. 

- Retail sales of consumer goods totaled 14.16 trillion yuan ($2.28 trillion), up 10.5 percent after adjusting for inflation. Online retail sales of commodities amounted to 1.38 trillion yuan ($222.18 billion), up 38.6 percent and accounting for 9.7 percent of total retail sales. 

- The per-capita disposable income of urban residents stood at 15,699 yuan ($2,528), up 6.7 percent after adjusting for inflation. 

- The per-capita cash income of rural residents stood at 5,554 yuan ($894), up 8.3 percent after adjusting for inflation. 

- New yuan-denominated loans amounted to 6.56 trillion yuan ($1.06 trillion), 537.1 billion yuan ($86.47 billion) more than the same period last year. 

- As of the end of June, M2, a broad measure of money supply that covers cash in circulation and all deposits, reached 133.34 trillion yuan ($21.47 trillion), up 11.8 percent. 

- Total social financing, a measure of funds raised by entities in the real economy and a broad measure of liquidity in the economy in general, totaled 8.81 trillion yuan ($1.42 trillion). 

(Source: National Bureau of Statistics, all growth rates are year-on-year ) 

Copyedited by Kylee McIntyre 

Comments to dengyaqing@bjreview.com

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