Ex-ad­vi­sor: Econ­omy near­ing bot­tom

China Daily (Hong Kong) - - BUSINESS - By XIN ZHIMING xinzhim­ing@chi­nadaily.com.cn

The Chinese econ­omy may be hit­ting the bot­tom rung of its growth cy­cle or will bot­tom out in one or two years, ac­cord­ing to a lead­ing aca­demic and for­mer top gov­ern­ment ad­vi­sor.

Then it will en­ter a mid-rate growth track, said Liu Shi­jin, for­mer deputy head of the State Coun­cil’s De­vel­op­ment Re­search Cen­ter.

“The Chinese econ­omy is near its bot­tom and we should not be pes­simistic about its growth prospects,” he said.

Liu made the com­ments in an in­tro­duc­tion to a book on China’s econ­omy, writ­ten by a re­search team of the De­vel­op­ment Re­search Cen­ter.

Liu said ex­ports and in­fra­struc­ture in­vest­ment have hit low lev­els while the growth in real es­tate in­vest­ment will not con­tinue de­spite its re­cent re­bound. On the sup­ply side, factory-gate prices are ris­ing into positive ter­ri­tory and cor­po­rate prof­its are recovering.

“All of these are signs that the econ­omy is very near the bot­tom area or is bot­tom­ing out,” he said.

In the com­ing years, China will en­ter a rel­a­tively sta­ble, mid-rate growth track, although there may oc­cur some mi­nor fluc­tu­a­tions, Liu added.

China’s GDP growth beat mar­ket ex­pec­ta­tions to reach 6.9 per­cent in the first half of this year, but an­a­lysts gen­er­ally pre­dict it will ease mod­er­ately in the sec­ond half.

To sta­bi­lize growth, Liu sug­gested that China should ac­cel­er­ate the de­vel­op­ment of the ser­vices sec­tor and pro­mote eco­nomic re­struc­tur­ing and in­no­va­tion to pro­vide growth en­gines for its new stage of growth in the com­ing years.

China’s ser­vices sec­tor has con­trib­uted to 51.4 per­cent of GDP, but Liu said that based on the ex­pe­ri­ences of de­vel­oped economies, the ra­tio could fur­ther rise by 20 per­cent in the com­ing decades.

“China should fur­ther open up its econ­omy and pro­mote growth of the ser­vices sec­tor,” Liu said.

The na­tion should also push sup­ply-side struc­tural re­form, which will squeeze out low-ef­fi­ciency mar­ket play­ers and see com­pet­i­tive and in­no­va­tive com­pa­nies sur­vive and stand out.

Liu warned that prop­erty prices of first-tier ma­jor cities have surged to “un­ex­plain­able lev­els”, push­ing up de­vel­op­ment costs and un­der­min­ing com­pet­i­tive­ness of those cities. He sug­gested that land sup­ply should be in­creased and the pub­lic rental hous­ing pro­gram, in which peo­ple who cannot af­ford com­mer­cial hous­ing can sign long-term con­tracts to rent gov­ern­ment-sub­si­dized apart­ments, should be pro­moted.

Liu urged that a tax on the hold­ing of prop­er­ties should be launched as soon as pos­si­ble, to re­duce real es­tate mar­ket spec­u­la­tion and in­crease tax rev­enues of lo­cal gov­ern­ments.

YU FANGPING / FOR CHINA DAILY

A worker looks at a con­tainer ship in Qing­dao Port, Shan­dong prov­ince. China’s econ­omy is ex­pected to bot­tom out in one or two years.

Liu Shi­jin, for­mer deputy head of the State Coun­cil’s De­vel­op­ment Re­search Cen­ter

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