Out­look bright and sta­ble as China spends big

The Pak Banker - - BUSINESS -

China's slow­down may have spawned pes­simism around the world, with pre­dic­tions of a new round of "China doom and gloom," but the real pic­ture in China's shop­ping malls, cin­e­mas, restau­rants and job mar­ket is any­thing but down­beat. There are few at home who fore­see any­thing but sound, sta­ble growth in 2016. Cre­at­ing jobs and keep­ing the job mar­ket healthy is a top govern­ment pri­or­ity.

The Na­tional De­vel­op­ment and Re­form Com­mis­sion's Zhao Chenxin told re­porters Wed­nes­day that the econ­omy will main­tain a medium-to-high growth this year, a solid base for a steady job mar­ket.

He said large-scale un­em­ploy­ment is not an ex­pected byprod­uct of eco­nomic re­struc­tur­ing, thanks to sound eco­nomic fun­da­men­tals and new growth en­gines. The reg­is­tered un­em­ploy­ment rate in China's cities was 4.05 per­cent at the end of 2015, and China cre­ated 13.12 mil­lion new jobs for ur­ban res­i­dents last year, both bet­ter­ing of­fi­cial tar­gets. Mean­while, con­sumer and pro­ducer price indices re­leased Thurs­day also showed en­cour­ag­ing signs of sta­bil­ity in the econ­omy. China's con­sumer prices rose for a third con­sec­u­tive month in Jan­uary thanks to ris­ing food prices, sig­nal­ing eas­ing of de­fla­tion­ary pres­sure.

Dur­ing the re­cent Lu­nar New Year hol­i­day, a mini-boom demon­strated how lit­tle pes­simism is ev­i­dent in the real econ­omy, with plenty of spend­ing on presents, en­ter­tain­ment, tourism and travel. Sta­tis­tics by the Min­istry of Com­merce showed that from Feb 7 to 13, rev­enue of re­tail­ers and restau­rants in China hit 754 bil­lion yuan ($116 bil­lion), up 11.2 per­cent on the com­pa­ra­ble pe­riod last year.

From Feb 8 to 13, Chi­nese cin­e­mas took 3 bil­lion yuan, up 67 per­cent. The first day of the Lu­nar New Year was China's best day ever at the box-of­fice, with cin­e­mas rak­ing in a record 660 mil­lion yuan from 19 mil­lion movie­go­ers. Ac­cord­ing to China UnionPay, source of al­most all bank card trans­ac­tions on the Chi­nese main­land, the num­ber of peo­ple buy­ing din­ner with cards rose by six per­cent, with each din­ner cost­ing around 585 yuan.

Ac­cord­ing to the Na­tional Tourism Ad­min­is­tra­tion, tourism rev­enue dur­ing the Lu­nar New Year hol­i­day was 13.8 bil­lion yuan, up 14.2 per­cent from last year. Around 6 mil­lion peo­ple trav­elled abroad. "Con­sump­tion in China... has shown re­mark­able re­silience de­spite cycli­cal weak­ness and as­set price volatil­ity," said China In­ter­na­tional Cap­i­tal Cor­po­ra­tion (CICC) in a re­port.

In 2015, con­sump­tion gen­er­ated roughly two thirds of GDP, up from just over a half in 2014. CICC ex­pects the growth of con­sump­tion to be rel­a­tively re­silient with house­hold in­comes con­tin­u­ing to ex­pand in the near term.

Re­form and in­no­va­tion re­main the anointed choices of the govern­ment to lead the econ­omy down a sus­tain­able, long-term path. Com­pa­nies can ex­pect govern­ment sup­port as they upgrade their tech­nol­ogy, prod­ucts and busi­ness mod­els and re­duce their debt. A wide range of mea­sures for emerg­ing busi­nesses in­clude fi­nan­cial sup­port, busi­ness parks and less red-tape.

Th­ese ef­forts have al­ready paid off. An un­de­ni­able wave of in­no­va­tion and en­trepreneur­ship has swept the na­tion. The num­ber of newly-reg­is­tered en­ter­prises hit 4.4 mil­lion in 2015, up 21.6 per­cent. Of course, the pic­ture is not en­tirely rosy. There is cer­tainly no short­age of dif­fi­cul­ties and chal­lenges ahead, most no­tably se­vere struc­tural over­ca­pac­ity.

"For the govern­ment, how to man­age a soft land­ing and find new sources of growth via struc­tural re­form and counter-cycli­cal eco­nomic pol­icy is a chal­leng­ing task," said Zhu Haibin, J.P. Mor­gan China chief econ­o­mist, in a note. Zhu ex­pects growth to come from tech­no­log­i­cal in­no­va­tion, in­dus­trial up­grades, eco­nomic open­ness and ex­panded ur­ban­iza­tion that will inevitably re­sult from land and house­hold reg­is­tra­tion re­form.

An in­side view of a car as­sem­bling fac­tory.

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