Beijing momentum gets stronger

The most recent data have shown that the momentum of China’s economic development is getting stronger, with the economic indicators for the first half of 2017 beating expectations and urban employment steadily improving.

There has also been further progress in growth rebalancing, with the ratio of consumption to GDP increasing and the service sector’s share in the economy continuing to grow.

But despite the good first-half momentum, the country’s leaders are conscious of the need to strike a balance between stabilising growth and defusing major risks, as signalled by the statement released after a meeting of the country's top leadership last week.

Although the fundamentals remain sound, prompting the IMF to raise its forecast of the country’s growth in 2017 from 6.6% to 6.7%, it was recognised at a meeting of the political bureau of the Communist Party of China central committee, presided over by general secretary Xi Jinping, that this does not mean the economic and financial risks can be ignored. The authorities needed to remain focused so they did the right things at the right time, as Xi emphasised.

Looking ahead, although policy makers will need to be prepared for a possible economic slowdown in the second half of 2017, as the cooling of the real estate market takes effect, the meeting has made it clear there will be no let-up on reforms and the continuity and consistency of policies will be maintained to push forward supply-side structural reform and guard against systemic financial risks.

This means measures will be introduced to further cut excess capacity and reduce inventory, as well as ease the corporate and local government debt burden and deal with “zombie enterprises”, those unprofitable state-owned companies that are burdened with debt, mismanagement and/or overcapacity. Beijing, July 26.