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China moves to boost growth momentum amid market volatility

Updated: Jul 10,2015 7:51 AM     Xinhua

As the wild swings and slides of China’s stock markets show signs of abating, eyes are now on the nation’s decelerating growth and reform agenda.


The State Council, China’s cabinet, stepped up onJuly 8 to assure that the government had plenty of tools at its disposal to restore confidence in the economy, and the country could realize its major economic and social development targets this year.

China’s economy expanded 7.4 percent in 2014, the slowest rate for 24 years. This year’s growth target is set at approximately 7 percent, lower than the double-digit growth of the past decades but still robust by international standards.

“Positive signs have been increasing in the last two months and structural readjustment has been accelerated,” said a statement released after an executive meeting of the State Council presided over by Premier Li Keqiang.

Recent economic data has fueled hopes of a rebound after first quarter growth was posted at 7 percent, weighed down by a housing market downturn and industry overcapacity, said some private and think tank economists.

China’s market demand is bottoming out with the manufacturing purchasing managers’ index (PMI), a key measure of factory activity, climbing steadily and other economic indicators like electricity consumption and longer-term loans edging up in recent months, said Lian Ping, chief economist at the Bank of Communications.

The macroeconomic slowdown is expected to reverse at the end of this year or the first quarter of 2016, as moderated growth is due to domestic factors rather than external challenges, said Li Daokui, professor at Tsinghua University.

Economists held that China lowered its economic growth target to help with restructuring efforts to place more focus on higher-quality and innovation-driven growth, while the housing market in the big cities has witnessed a revival with the help of supportive monetary and fiscal policies.

Home sales in China’s tier-one cities, like Beijing and Shanghai, surged 42.9 percent in the first half of this year on a yearly basis, with the uptick in tier-two cities at 16.9 percent, leading property agent Centaline revealed.

China’s growth slowdown is not unexpected, the World Bank said earlier this month, adding that it was “desirable from a short and medium-term perspective,” as the country prioritizes balancing reforms and managing short-term demand.

Efforts to cut heavy industry inventories, dampen unproductive risk taking in shadow banking, and solidify budget constraints for local governments will help make investment more efficient, and realign growth over the medium term. However, such reforms will depress economic activity in the short term, the global lender said in its latest China Economic Update report.

The State Council on July 8 demanded that policies, reform measures and projects be implemented to ensure economic growth remains in a proper range, as they will promote quality growth and upgrading.

The World Bank predicted China’s economy would expand 7.1 percent in 2015 and 7 percent in 2016, largely in line with its previous predictions.

To combat the economic slowdown, China’s central bank cut the benchmark interest rates four times since November and lowered banks’ reserve requirement ratio twice since February.

The State Council on July 8 decided that more than 250 billion yuan ($41 billion) in misused or dormant funds should be reclaimed by fiscal bodies, and the money should be invested in underfunded areas.

Growth in China’s service sector remains robust, especially in advanced services such as banking and insurance, and consumption has grown slightly faster than investment in recent years.