GOVT FOCUSES ON QUALITY NOT QUANTITY
China adoptedmeasures to steer local officials’ focus away fromeconomic growth, measured by GDP. That’s been seen as a major reason behind the country’s inability to alleviate its long-standing overcapacity problem, an economist fromgovernment think tank said on Thursday.
The importance ofGDP has been significantly lowered in the systemthat evaluates local officials’ performance. Focus shifted toward quality, not quantity of growth, Huang Qunhui, director of the Institute of Industrial Economics of the Chinese Academy of Social Sciences toldanewsconference.
Overcapacity is problematic for China’s economic officials. Despite the central government’s repeated calls and administrativemoves to quell it, the problem has not shown signs of easing.
A major reason, according to analysts, is local governments’ persistent protectionist attitude, and half-hearted response toward Beijing’s call. The industries with themost excess capacity in China are not only crucial for local GDP growth, but also critical to their fiscal revenue and employment. coming months,” Qu added.
“A few industries that are sensitive to the mini-stimulus may have started to benefit from the pro-growth policies,” Xu Gao, chief economist for Everbright Securities Co, was cited by Bloomberg News as saying. “It’s still too early to conclude that a quick rebound is taking place in the Chinese economy,” as funds available for projects on the ground remain tight and property weakness persists.
Jiang Chao, an analyst with Haitong Securities, said it is still too early to conclude the economy has touched bottom and is on track for a steady recovery.
He cited the inconsistency between the PMI preliminary reading and May’s electricity output. So far this month, power output grew 4 percent, slower than the 4.4 percent gain for the last 10 days of April.
A worker walks past steel products in Rizhao, Shandong province. China's preliminary Purchasing Managers Index was 49.7 in May, according to HSBC Holdings Plc and Markit Economics.