Positive signs have started to emerge in China’s economy since the second quarter, suggesting deepened industrial restructuring amid rapid growth in the high-tech and Internet industries, according to economists.
The government’s reform policies have started to show effects in reshaping the economic engine to depend on consumption and services, rather than the traditional investment-driven model, they said.
The country’s GDP growth, which is likely to slip below 7 percent during the April-to-June period, may rebound in the third quarter, according to Wang Jun, a senior economist at the China Center for International Economic Exchanges, a government think tank.
“Stable growth of the service sector is expected to offset the downward momentum in the manufacturing industry and support the overall GDP, as well as provide sufficient job opportunities, which will help China transform its growth pattern without a sharp slowdown,” said Wang.
During the first three months, the year-on-year growth in the services sector was about 8 percent, compared with 6.4 percent in the first quarter of 2014, according to data from the National Bureau of Statistics.
The faster development of the service industry contributed 56.8 percent to the GDP growth in the first quarter, up from 51.7 percent in 2014.
Besides, new driving forces are emerging, including high-tech and Internet-based businesses, Wang said.
In April, the high-tech industry clocked growth in excess of 10 percent from a year earlier, compared with the overall industrial output growth rate of 5.9 percent, the NBS data showed.
During the first quarter, operating revenue of the country’s Internet-related services business rose by 26.9 percent year-on-year, much higher than the 2 percent average industrial income growth.
Xia Bin, a consultant to the State Council, said that China is likely to achieve its full-year employment growth target as the government is encouraging more startups and technological innovation.
According to the official data, job opportunities increased by 7.5 percent in the first quarter.
Fielding Chen, an economist with Bloomberg LP, said: “There are signs that the economic rebalancing is bearing fruit in some parts of the country.”
Chen cited Zhejiang province as an example. Zhejiang, which is the home to Internet giant Alibaba Group Holding Ltd and China’s e-business hub, “stands out as one of the country’s few bright spots”, he said.
It was the only province where growth accelerated at a much faster pace in the first quarter. Zhejiang’s GDP expanded by 8.2 percent year-on-year in the first quarter, from 7.6 percent in 2014.
“This was mostly due to the services sector, which contributed 5.3 percentage points to the first-quarter growth. The software and information sector posted 27.6 percent year-on-year growth in revenue, while online sales increased by 28.6 percent,” said Chen.
“As China works toward rebalancing its economy, the success of Zhejiang may point to the direction of future growth,” he said.
The recent policy adjustments also helped stabilize China’s economy. The central bank cut benchmark interest rates by another 25 basis points on May 10, the third time in six months, guiding the subsequent visible decline in money market rates.
The Ministry of Finance, the central bank and the China Banking Regulatory Commission also jointly confirmed that direct debt placement between local governments and creditors will be allowed, aiming to increase liquidity and relieve the debt burden.
All the measures, with more supportive policies to be released in the coming months, will continue to take effect to maintain the growth rate at around 7 percent this year, economists said.