Strong and Steady: The Grow­ing Chi­nese Econ­omy

China Pictorial (English) - - Contents - Text by Du Feilun The au­thor is an ex­pert with the eco­nomic sit­u­a­tion anal­y­sis group of the Chi­nese Academy of Macroe­co­nomic Re­search.

As the global econ­omy has slowly re­cov­ered, China ex­panded its GDP by 6.9 per­cent year-on-year in the first half of 2017 with deep­ened sup­ply-side struc­tural re­form. Ev­ery key in­di­ca­tor pro­duced num­bers bet­ter than ex­pected. With more visible mo­men­tum, the Chi­nese econ­omy will sus­tain steady growth at medium-to-high speed.

As it en­ters a “new nor­mal” phase, the Chi­nese econ­omy fea­tures stronger vi­tal­ity of en­ti­ties and mo­men­tum in macroe­co­nomic devel­op­ment, im­proved sup­ply-de­mand re­la­tions and cor­po­rate prof­itabil­ity, brighter mar­ket ex­pec­ta­tions and in­dus­try out­looks, steady growth and bet­ter liveli­hood.

Mea­sures to pro­mote the sup­ply-side struc­tural re­form, which in­clude cut­ting over­ca­pac­ity, de­stock­ing, delever­ag­ing, cut­ting cor­po­rate costs and shoring up weak eco­nomic links, have yielded promis­ing re­sults. By the end of May, China had com­pleted 84.8 and 65 per­cent of its tar­get to cut over­ca­pac­ity of crude steel and coal, re­spec­tively, com­mer­cial res­i­den­tial hous­ing for sale had dropped 8.5 per­cent yearon-year, and debt-to-as­set ra­tio of in­dus­trial en­ter­prises above the des­ig­nated size had dropped 0.7 per­cent­age points. Im­proved pro­duc­tion and man­age­ment led to bet­ter prof­itabil­ity. The pri­mary busi­ness rev­enues and prof­its of in­dus­trial en­ter­prises above the des­ig­nated size grew by 13.5 and 22.7 per­cent year-on-year, re­spec­tively, from Jan­uary to May of this year.

Brighter mar­ket ex­pec­ta­tions have in­jected mo­men­tum into the real econ­omy. As of June, the Pur­chas­ing Man­agers’ In- dex (PMI) of China’s man­u­fac­tur­ing in­dus­try was above 50 per­cent for 11 con­sec­u­tive months which in­di­cates ex­pan­sion, and China’s Non-man­u­fac­tur­ing In­dex (NMI) fol­lowed the same trend, re­main­ing above 54 per­cent for nine con­sec­u­tive months.

Stronger poli­cies have in­creased ter­mi­nal de­mand in China, mak­ing en­ter­prises more ca­pa­ble to in­vest and ex­port, and res­i­dents more will­ing to con­sume. In the first half of this year, in­fra­struc­ture in­vest­ment con­trib­uted around 46 per­cent of China’s fixed as­set in­vest­ment, and the growth rate of private in­vest­ment rose by four per­cent­age points year-on-year. China’s ex­ports stopped shrink­ing and grew by 15 per­cent year-on-year while to­tal re­tail sales of con­sumer goods ben­e­fited from up­graded con­sump­tion and grew by over 10 per­cent year-on-year.

The ac­cel­er­ated shift of driv­ing forces for growth op­ti­mized China’s eco­nomic struc­ture. In the first half of this year, the ter­tiary sec­tor played a cru­cial role as it ac­counted for over 54 per­cent of China’s GDP, and stronger do­mes­tic de­mand drove con­sump­tion to be­come a pri­mary en­gine with fi­nal con­sump­tion ex­pen­di­tures con­tribut­ing over 63 per­cent to eco­nomic growth.

Sta­ble pric­ing, em­ploy­ment and in­come are en­sur­ing im­prove­ment in peo­ple’s liveli­hood. In the first half of this year, the Con­sumer Price In­dex (CPI) rose by 1.4 per­cent year-on-year, with the prices of the other seven ma­jor cat­e­gories of goods and ser­vices ris­ing mod­er­ately ex­cept the de­clin­ing food price. With 7.35 mil­lion new ur­ban jobs cre­ated in the pe­riod, which ac­counted for 65 per­cent of China’s tar­get for this year, the na­tion­wide sur­vey-based ur­ban job­less rate dropped be­low five per­cent. Grow­ing along with GDP, China’s per capita dis­pos­able in­come went up by 7.3 per­cent af­ter de­duct­ing price fac­tors.

Re­cently, global fi­nan­cial in­sti­tu­tions in­clud­ing the In­ter­na­tional Mon­e­tary Fund (IMF) up­graded the 2017 growth fore­cast for the world econ­omy, stat­ing that de­vel­oped economies will sus­tain mod­est re­cov­ery while emerg­ing economies will likely sta­bi­lize and re­cover in the sec­ond half of the year. As the world econ­omy warms up, China faces less pres­sure from pe­ri­odic ad­just­ments since in­ter­nal growth driv­ers be­come strong enough to fur­ther re­lease potential.

Al­though China is gain­ing more fa­vor­able con­di­tions for steady growth, at­ten­tion should still be placed on neg­a­tive im­pact de­rived from pres­sure caused by struc­tural con­flicts. Mea­sures such as pro­mot­ing sup­ply-side struc­tural re­form, stream­lin­ing ad­min­is­tra­tion, del­e­gat­ing power to lower lev­els, and cut­ting taxes and fees will con­tinue to im­prove the en­vi­ron­ment for eco­nomic growth. Stronger en­trepreneur­ship and in­no­va­tion will drive mar­ket play­ers for­ward with new tech­nolo­gies, new in­dus­tries, new busi­ness forms and new busi­ness modes. The con­struc­tion of the Belt and Road, in­te­grated devel­op­ment of the Beijing-tian­jin-hebei re­gion, the Yangtze River Eco­nomic Belt and the Xiong’an New Area will all con­trib­ute to the cre­ation of more space for China’s eco­nomic growth.

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