Sup­ply-side struc­tural re­form, public in­vest­ment reap re­wards for econ­omy

China Daily (Hong Kong) - - BUSINESS - By ZHANG YUE and XIN ZHIMING

The IMF on Mon­day raised its fore­cast for China’s GDP growth for this year and 2018, cit­ing growth-boost­ing high public in­vest­ment by the world’s sec­ond-largest econ­omy.

An­a­lysts said growth could still be higher and reach 7 per­cent as the coun­try presses ahead with its sup­ply-side struc­tural re­form.

The IMF said it ex­pected China to in­crease public in­vest­ment to main­tain sta­ble growth and fore­cast that its GDP growth could be 6.7 per­cent this year, up 0.1 per­cent­age point from its April fore­cast. China’s growth may mod­er­ate to 6.4 per­cent in 2018, up 0.2 per­cent­age point from its pre­vi­ous fore­cast.

Li Daokui, econ­o­mist and di­rec­tor of the Cen­ter for China in the World Econ­omy at Ts­inghua Univer­sity, said that the “Chi­nese econ­omy will bot­tom out this year and re­gain strong growth mo­men­tum in 2018 and 2019, and pos­si­bly rise above 7 per­cent in terms of year-onyear GDP growth.”

The on­go­ing sup­ply-side struc­tural re­form has seen China cut some of its ex­ces­sive pro­duc­tion ca­pac­ity and bol­ster prices, and lo­cal gov­ern­ments are ex­pected to be more ac­tive in de­vel­op­ing the econ­omy af­ter the 19th Na­tional Congress of the Com­mu­nist Party of China sets the tone for growth later this year, Li was cited by a Chi­nese news por­tal as say­ing.

China achieved fasterthan-ex­pected GDP growth of 6.9 per­cent in the first half of this year and the up­ward growth trend may con­tinue in the com­ing three to five years, Li said at a fo­rum in June.

Li said he be­lieved that China is poised for a golden op­por­tu­nity of eco­nomic re­cov­ery and ex­pan­sion af­ter ex­pe­ri­enc­ing years of de­cline in its growth rate. He said that in­vest­ment has sta­bi­lized do­mes­ti­cally and con­sump­tion has been on the rise, bol­ster­ing the econ­omy de­spite strength­ened fi­nan­cial mar­ket reg­u­la­tion and cool­ing mone­tary sup­ply growth.

In­vest­ment in in­fra­struc­ture grew 9.2 per­cent yearon-year in the first quar­ter, up from 8.1 per­cent over the same pe­riod of last year, sig­nal­ing that in­vestor con­fi­dence is pick­ing up. The re­port pre­dicted that pri­vate in­vest­ment and in­fra­struc­ture in­vest­ment will con­tinue to grow from the later half of 2017 and in 2018.

Li said the re­bound in in­vest­ment is at­trib­ut­able to the steps the coun­try has taken in re­cent years to re­duce lever­age lev­els, cut taxes, and phase out ex­ces­sive in­dus­trial ca­pac­ity, which aimed to re­place old growth driv­ers with new ones, as well as tax cuts.

The coun­try’s con­tin­u­ous delever­ag­ing ef­forts in both the fi­nan­cial and non-fi­nan­cial sec­tors have pro­duced re­sults, cut­ting cor­po­rate debt and boost­ing prices, which con­trib­uted to an im­prove­ment in cor­po­rate prof­its and stead­ied the nerves of in­vestors over China’s po­ten­tial debt cri­sis.

“All these ef­forts have helped busi­nesses gain in­creased prof­its in 2017, which has boosted cor­po­rate con­fi­dence in the real econ­omy and led to a stronger will­ing­ness to in­vest, ” Li said.

Liu Yuanchun, an econ­o­mist at Ren­min Univer­sity of China, ar­gued that al­though the first two quar­ters of 2017 had seen rel­a­tively strong in­vest­ment mo­men­tum, in­vest­ment from Sta­te­owned en­ter­prises still takes the lion’s share of over­all in­vest­ment, adding that con­fi­dence in the pri­vate sec­tor re­mains too weak to bol­ster a strong eco­nomic re­bound.

The cur­rent anti-glob­al­iza­tion wave and ris­ing pro­tec­tion­ism in cer­tain coun­tries are a ma­jor con­cern for many ob­servers, but this may bring some op­por­tu­ni­ties for China to ex­pand its in­flu­ence in global eco­nomic and fi­nan­cial gov­er­nance, par­tic­u­larly with the un­fold­ing of the Belt and Road Ini­tia­tive, the re­port sug­gested.

Chi­nese econ­omy will bot­tom out this year and re­gain strong growth mo­men­tum in 2018 and 2019.” Li Daokui, di­rec­tor of the Cen­ter for China in the World Econ­omy at Ts­inghua Univer­sity

Con­tact the writ­ers at zhangyue@ chi­nadaily.com.cn

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