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China's economy slows to restore endurance

BEIJING, July 14People's Daily Online

China's GDP grew nearly 10 percent in the first half of the year compared to the same period of last year. Meanwhile, its Consumer Price Index grew more than 5 percent from a year earlier, according to statistics released by the National Bureau of Statistics on July 13.

Industry insiders believe that China's economic growth slowed slightly because certain macro-regulation policies took effect. Currently, the country's economy is shifting from fast growth driven by stimulus policies to self-driven, healthy development.

Fast economic growth due to stimulus policies

The NBS estimated that China's GDP reached more than 20.4 trillion yuan in the first half of 2011, up nearly 10 percent from a year earlier at comparable prices. Specifically speaking, the growth was 9.7 percent in the first quarter and 9.5 percent in the second quarter.

Sheng Laiyun, director of the Department of Comprehensive Statistics and spokesman for the NBS, said that despite declines in certain economic indicators for the first half of the year, the overall economic performance of China was good. The Chinese economy is shifting from fast growth driven by policy to self-driven, healthy development.

Guo Tianyong, a professor at the School of Finance under the Central University of Finance and Economics, said in an interview that after the global financial crisis, China had no choice but to introduce a stimulus plan to support economic recovery. It should be noted that stimulating the economy is not in line with the direction of China's economic reform, he said.

The stimulus plan used too much money, making it difficult for the government to curb inflation, Guo said. In order to reduce inflation and accelerate economic restructuring, China should phase out economic stimulus policies, encourage enterprises to conduct innovation to increase the effective supply of products and follow the self-propelled economic development pattern, he said.

China's economy cannot always run at an accelerated speed

The NBS statistics showed that China's retail sales of consumer goods witnessed steady growth in the first half of the year, but the growth in the sales of products related to the automotive and real estate industries slowed. Vehicle sales rose 15 percent in the past six months, a growth rate of 22.1 percentage points lower than that of the same period last year. The growth in the sales of furniture was 30 percent, 8.5 percentage points lower than last year. The growth in the sales of household appliances as well as audio and video equipment was nearly 22 percent, 7.3 percentage points lower than last year.

"Some major economic indices declined in the second quarter of 2011. It was mainly caused by the active readjustments and controls and also a normal reaction after the stimulus policies were withdrawn from the market," Sheng said.

Sheng said that after the subsidy policy for automobile sales was cancelled and the automobile-purchasing limitation policy was launched in some cities, the growth rate of the sales volume of the automobiles above the limitation has decreased by more than 20 percent in 2011 compared to the same period of 2010. The readjustments and controls on real estate have also affected the sales of related products, and the sales volumes of furniture, construction materials, decoration materials and others have all had an obvious decline compared to the same period of 2010.

"It is the normal reaction after the stimulus policies were withdrawn. It is similar to a long-distance runner. A long-distance runner could not always run at his top speed and sometimes must slow down to gather strength for the rest of course."

Lian Ping, Chief Economist of the Communication Bank of China, said, "China's economic growth rate decreased smoothly from 9.7 percent in the first quarter to 9.5 percent in the second quarter of 2011. The macroscopic readjustments and controls have shown their preliminary effects."

But Lian also said that the 9.6 percent GDP growth rate of the first half of 2011 is a little higher than the market expectation. Factors, such as electricity shortages, a weakening purchasing managers’ index and asset price adjustments, had led to market concerns about the second quarter's data, but the 9.5 percent GDP growth rate of the second quarter indicates that the economic slow-down is quite smooth.

Guo also believes that the monetary policies, under the dense macroeconomic readjustments and controls, took restraining the inflation as its foothold in the first half of 2011. From the data, it could be seen that the economy has fallen back a little bit. It will alleviate the concerns about a possible hard landing and stagflation of China's economy. It is expected that, in the second half of 2011, China will continue its steady monetary polices, price-control mechanisms will have more room to play their role, and interest rates will also be raised once or twice.

Endogenous growth power remains strong

"Judging from the current and future situation, China's economic growth remains relatively strong, and the risk of rapid decline in economic growth is relatively small," Sheng said, when answering questions of reporters.

Sheng said that first, in regard to investments, as 2011 is the beginning of the 12th Five-Year Plan, the investment enthusiasm in various areas is relatively high. The local investment growth rate stood at more than 28 percent, which is a relatively high figure. The growth rate of private investments stood at nearly 34 percent in the first half of 2011, which is significantly higher than the average growth rate of national fixed assets, indicating that the market investment growth is relatively fast.

Furthermore, the income of urban and rural residents continued to increase in the first half of 2011, which will also increase the consumption strength of residents. Meanwhile, the social security and consumption environment continues to improve, which will also promote consumption.

Although China's export growth rate dropped by a relatively wide margin, the 20 percent export growth rate is still not a low figure because the base number of 2010 was relatively high and China's trade surplus reached 44.9 billion yuan in the first half of 2011. Therefore, China's exports continue to increase steadily. As China is in the acceleration phase of industrialization and urbanization, the power and growth space of the troika are still relatively large. In addition, structural adjustments and the transformation of development patterns in various places, including the acceleration of the pace of industrial upgrading, will also continue to give new vitality and driving force to the economic growth.

"Economic structural adjustments will bring greater space to allow China's economy to get on a healthier development track. The Chinese government should implement certain preferential policies to cultivate strategic emerging industries in order to stimulate business innovation. Some state-owned monopoly-type fields should also be further opened to private capital," Guo said.

Lian predicts that China's economy will further slightly decline in the second half of 2011. "In the second half of 2011, China's investment will not obviously slow down because the affordable housing construction will be further accelerated, and the level of consumption will slightly increase. In the first half of 2011, the rigid demand of the automotive industry and real estate was restricted by the macroscopic readjustment and control, which will be released if housing and car prices show slight decline in the second half of 2011," Lian said.

He also predicts that China's GDP growth will reach nearly 10 percent in 2011.


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