The third-quarter economic performance of China reported on Oct 20 was represented by a 6.7 percent growth in GDP from the same period last year.
With the same growth rate achieved in the first half of the year, China’s growth target of between 6.5 and 7 percent for the whole year, is attainable.
A 6-plus percent growth may seem nothing special when compared with the country’s growth in the recent past. But it is based on some new situations. Indeed, it would be amateurish for some self-appointed experts from overseas to say China is still being led by the same old economy and same old industry.
First, it is easy to see that much of the growth is no longer driven by exports, and therefore there is no desire to increase exports by lowering the value of yuan against the US dollar.
Second, it is no longer driven by massive government investment, not only investment by the central government, but investment at the local level, as was the case immediately following the outbreak of the 2008 financial crisis.
Third, industry achieved some overall growth despite exports being sluggish and some sectors, most noticeably steelmaking and coal mining, have been undergoing deep cuts in capacity.
Fourth, home sales, and all the consumer spending they entail, can, as they did in September, serve as a growth booster if carefully managed.
Fifth, retail, especially in the large cities, did not collapse because of the tightened discipline on government expenses, as some feared when the anti-corruption campaign was launched years ago.
However, the most encouraging ray of light in the third quarter was the increase in investment by the private sector, after a long period of sluggish growth.
Private investors would not have increased their commitment unless they could see, in terms of common sense rather than the government’s industrial policies, something worth their money, and a regulatory environment that can protect their lawful returns.
The increase was small. But it is a heartwarming sign considering the attraction of diverse overseas investment opportunities.
It should also be noted that more private investment can still come because in many new cities, public utilities remain under-developed and lag far behind the demand.
Admittedly, the stability that China has achieved in the third quarter is only a small success in comparison with its huge tasks of pressing ahead with structural reform of the economy, controlling its debt level and correcting the regional imbalances. But while stability does not mean health, a healthy economy is impossible without a minimum of stability.