Growth rate not everything in Chinese economy

People's Daily, May 2, 2012

The growth rate of Chinese economy has been declining for five consecutive quarters. People are not only worry about this but also expect that the macro-economy can bottom out as soon as possible. Therefore, the discussion that when the Chinese economy will bottom out is getting hotter and hotter.

In particular, the discussion is further pushed to a new high after the Chinese Academy of Social Sciences recently released the report to lower the growth rate of GDP in 2012.

In this regard, experts pointed out that the focus of Chinese economy is not the "bottom out" and speed but how to seize the opportunity to prepare for adjustment of economic structure and improvement of economic quality.

Heated discussion

The Spring Report 2012 on China's Economic Prospects released by the Chinese Academy of Social Sciences on April 25 shows that the growth rate of Chinese economy will further decline in 2012. It is expected that the growth rate of GDP will be about 8.7 percent, a drop of 0.5 percentage points from 2011.

Then, people began predicting when the Chinese economy will bottom out.

Some analysts said that since the growth rate of industrial value added rebounded in March and the official Purchasing Managers' Index (PMI) also rebounded significantly, China's economy has bottomed out and it will begin to rise in the second quarter in 2012.

However, other analysts did not think so. Wang Jian, expert of China Society of Macroeconomics, said that the rebound of industrial value added growth rate can only show that the trend of economic downturn is straight but not folded. As long as there is no large adjustment and reform and the contradiction of overproduction is not resolved fundamentally, the trend of economic downturn will continue into 2013.

Some people said that China's economy will rebound in the third quarter. Zhang Zhiwei, chief economist of Nomura Securities, said that the 8.9 percent in the fourth quarter in 2011 and 8.1 percent in the first quarter in 2012 made the macro economist generally predict that China's economy has bottomed out and it will rebound in the third quarter in 2012. They believed that the factors supporting the rebound include the improvement of mobility, restoration of export environment and reverse of some industries.

Growth rate still needed

The experts said that people do not need to worry too much about the "bottom out" and declining growth rate.

Liu Mingkang, former chairman of the China Banking Regulatory Commission, said that the slowing down of less than 1 percent is still acceptable. The growth rate of heavy industry is lower than that of the light industry for the first time; the PMI of manufacturing has been increasing for four consecutive months and the number of newly increased urban employment increased by 220,000 year-on-year, all of which testified that China's economy is achieving a smooth transition.

Some analysts said that a certain economic growth rate is needed in the smooth transition, which can ease the contradictions of employment, income distribution and social security.

Zhu Baoliang, chief economist of the Economic Forecast Department of the State Information Center, said that although China's economic growth rate is downward, it still is in a reasonable scope. While the economic growth rate is slowing down, the employment in China has maintained a good momentum.

Data shows that among three indexes to stimulate the economy, the investment and consumption still are dynamic and China's economic growth has a good foundation.

The report of the Chinese Academy of Social Sciences shows that this year's fixed asset investment growth rate will be somewhat lower than in 2011. Influenced by the favorable factors including rapid advance in the protection of housing construction, steady development of strategic emerging industries, acceleration of water conservancy construction and well development of cultural industries, the total fixed asset investments in 2012 is expected to fall 0.1 percentage points compared with 2011. The retail sales of social consumer goods are expected to increase 1.3 percentage points compared with 2011.

Lian Ping, chief economist of the Bank of Communication, said in an interview with the reporter that the risk of hard landing for China's economic growth in 2012 is very small. As long as the policy is reasonable and the regulation is appropriate, China's economy will maintain a reasonable growth rate and a trend of lower at first and higher in the end.