Stable growth pledge amid reforms

Chinese policy-makers appear to be putting more focus on growth stabilization while continuing to push reforms as headwinds to the economy remain.

Although latest figures show the economy remains generally stable and on track to reach its annual growth target, some indicators have shown signs of slower growth.

Industrial enterprise profit growth slowed to 16.2 percent in July from 20 percent in June. For the first seven months, enterprises’ profits climbed 17.1 percent year on year, down a notch from the 17.2 percent rise for the January-June period.

The reading added to signs of moderation, as revealed by indicators, including retail sales, fixed-asset investment and Purchasing Managers’ Index, which all maintained strong growth albeit at a slower pace.

Noting that fluctuations of the data were within a reasonable range, Ning Jizhe, deputy head of the National Development and Reform Commission and head of the National Bureau of Statistics, said the focus now should be on avoiding these fluctuations turning into a downward trend.

The government vowed to coordinate efforts and policies to stabilize employment, finance, foreign trade, foreign investment, investment and expectations at a meeting of the Political Bureau of the Communist Party of China Central Committee last month.

The country should view strengthening areas of weakness as an important task in deepening supply-side structural reforms, with intensified efforts in improving infrastructure, according to the statement issued after the meeting.

Growth deceleration of infrastructure investment, a major source of downside pressure on short-term economic growth, will be reversed as the government’s supportive policies take effect, said Zhang Liqun, a researcher with the Development Research Center of the State Council, a government think tank.

On the monetary front, the People’s Bank of China changed the wording for liquidity management in its second-quarter monetary policy report to “keep liquidity at a reasonable and ample level” from “ensure a reasonable, stable level of liquidity” in the first-quarter report.

Analysts believe the government’s recent adjusting toward a pro-growth stance was just policy fine-tuning and presaged no change in strategy.

UBS economist Wang Tao expects more policy easing on the way, but the magnitude of easing is data dependent and designed mainly to offset any upcoming negative external shocks.

Wang Jun, a chief economist at Zhongyuan Bank, said the country would enhance demand-side regulation in the short term and continue to push supply-side structural reforms in the longer term. China’s rapid growth over the past decades was fueled by capital investment, exports and consumption, which are considered as being on the demand side.

To promote high-quality development, the country should step up efforts in sectors including protecting property rights and intellectual property, improving the mechanism for risk management, and promoting opening-up, according to Wang Yiming, deputy director of the Development Research Center.