China’s eco­nomic fun­da­men­tals re­main strong

Pol­i­cy­mak­ers still have am­ple am­mu­ni­tion to use if they need it

China Daily (USA) - - G20 2016 CHINA - By XIN ZHIMING xinzhim­ing@chi­

China’s eco­nomic growth sta­bi­lized in the first half of this year, with ini­tial signs show­ing it could con­tinue to be sta­ble dur­ing the rest of the year, say an­a­lysts.

Even though the coun­try’s GDP growth dipped to 6.7 per­cent year-on-year in the first six months, ac­cord­ing to the Na­tional Bureau of Sta­tis­tics, fixed-as­set in­vest­ment grew 9 per­cent year-on-year in the same pe­riod and re­tail sales in­creased by 10.3 per­cent. And China’s GDP growth is within its tar­geted range of 6.5 to 7 per­cent for this year, while its in­dus­trial and in­vest­ment struc­tures have im­proved, with growth of high-tech and con­sump­tion prod­ucts in­creas­ing strongly, an­a­lysts say.

“China’s eco­nomic trend in the first half has sta­bi­lized thanks to boost­ing poli­cies and other sta­bi­liza­tion-ori­ented mea­sures,” says Zhang Liqun, an econ­o­mist with the De­vel­op­ment Re­search Cen­ter of the State Coun­cil, China’s Cab­i­net.

But since the global eco­nomic re­cov­ery is still weak and de­vel­oped coun­tries’ pol­i­cy­mak­ers seem un­able to find ef­fec­tive so­lu­tions to boost their economies, ex­ter­nal de­mand will re­main weak for some time, af­fect­ing China’s ex­ports in the sec­ond half of the year, says Justin Yifu Lin, an econ­o­mist with Pek­ing Univer­sity.

De­spite the many uncer­tain­ties fac­ing the global econ­omy, China’s GDP growth could reach 6.7 per­cent in the third quar­ter thanks to ris­ing num­bers of new con­struc­tion projects and in­creas­ing in­fra­struc­ture in­vest­ment, as well as brisk growth of con­sump­tion and newin­dus­tries, says a Bank of China re­port.

“The Chi­nese econ­omy is not in for a hard land­ing since it boasts a large do­mes­tic mar­ket and it is still pur­su­ing ur­ban­iza­tion and in­dus­tri­al­iza­tion, which will serve as growth en­gines,” Zhang says.

In July, some in­di­ca­tors, such as fixed-as­set in­vest­ment, weak­ened, but the profit lev­els of ma­jor in­dus­trial en­ter­prises rose by 6.9 per­cent year-on-year in the first seven months. In July, prof­its of these en­ter­prises grewby 11 per­cent, up from 5.9 per­cent in June.

“The rise in in­dus­trial prof­its means, from a mid- to longterm per­spec­tive, China’s eco­nomic fun­da­men­tals have shown pos­i­tive changes,” says Deng Haiqing, an econ­o­mist with JZ Se­cu­ri­ties.

Re­flect­ing such op­ti­mism, Robert Ka­plan, pres­i­dent of the Fed­eral Re­serve Bank of Dal­las in the United States, said in late Au­gust that China’s eco­nomic fun­da­men­tals have im­proved com­pared with the fig­ures for early this year.

Even if the prospects turn out to be not as bright as ex­pected, pol­i­cy­mak­ers still have am­ple am­mu­ni­tion to an­chor the sit­u­a­tion, an­a­lysts say.

Pol­icy sup­port may in­ten­sify if growth slows, which is likely in the fourth quar­ter, says a UBS re­port.

If in­vest­ment con­tin­ues to slow and down­ward pres­sures on the econ­omy be­come more ap­par­ent, China will prob­a­bly in­ten­sify pol­icy sup­port again to meet its 2016 GDP growth, the re­port says, adding that mea­sures may in­clude boost­ing in­fra­struc­ture and other pub­lic in­vest­ments, by pro­vid­ing credit sup­port and ac­cel­er­at­ing pro-growth re­forms to stim­u­late pri­vate in­vest­ment and con­sump­tion.

The rise in in­dus­trial prof­its means ... China’s eco­nomic fun­da­men­tals have shown pos­i­tive changes.” Deng Haiqing, econ­o­mist with JZ Se­cu­ri­ties

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