Data has shown that some changes quietly took place in the economic growth structure of China in the first half of this year against the backdrop of a sliding economic growth. This was what the macro economic control intended to achieve and it was also consistent with the economic development strategy of the 12th Five-Year Plan. China’s economy started to slow down its growth from the beginning of the second quarter of this year. Yet, the central government focused on economic restructuring and the transformation of economic growth model, instead of introducing a series of stimulative policies. Hence, efforts to optimize and restructure the economy yielded substantial results.
The economic structure improved, which was mainly reflected in the following areas:
First, economic growth slowed down, but the tertiary industry grew at an accelerated speed and increased its contribution to the national economy.
China’s GDP grew by 7.6% in real terms in the first half of the year, 0.2% lower than that of the corresponding period of last year. Its economic growth slowed down from a two digital growth rate to the medium growth range of 7-8%. There emerged an encouraging trend toward a better economic structure, with a slower growth and reduced contribution of the secondary industry v. a faster growth and greater contribution of the tertiary industry. These reversal changes of the secondary and tertiary industries in terms of their growth rate proportion in and contribution to the national economy fully demonstrated that China succeeded in reducing the excess production capacity of the traditional and high-energy consumption industries and vigorously developing modern service industries such as the logistics industry and online shopping. As a result, the growth structure gradually shifted from the one depending excessively on industrial production to the one that is projected by the macro control measures.
Second, the high-tech industry speeded up its growth while the industrial sector as a whole slowed down its growth.
In the first six months this year, the added value of the above-scale industries went up by 9.3% in China, 1.2% lower than that of the same period last year. In contrast, thanks to the state incentive policies, the added value of high-tech industries went up by 11.6%, 2.3% higher than that of above-scale industries. Consequently, enterprises increased their capacity for innovation. There appeared a growing trend towards producing high-end, green and terminal products. High-tech industries and strategic emerging industries displayed a good developing momentum.
Third, investment mix improved and consumption level picked up each month.
Starting from the beginning of this year, thanks to the macro control policies, there was a smaller increase in investment month after month and an improved investment mix. In the first half of the year, the manufacturing sector saw a smaller increase of only 15.6% in investment while the tertiary and primary industries a rapid rise of 33.5% and 23.5% respectively. The retail sales of consumer goods grew at an accelerated pace month after month. They went up faster in rural areas than in urban areas. And on-line shopping increased more rapidly than in-store purchases. Rural consumption, electronic online shopping and other forms of consumption highlighted the upgrading of consumption structure.
Fourth, prices were kept at a reasonable level and new jobs created.
Satisfactory results were achieved in stabilizing prices in the first half of the year with a 2.4% rise of CPI over the same period last year, far lower than the control target of 3.5% for the entire year. In spite of the slower economic growth in the said period, more than 7 million urban residents were employed, or about 80% of this year’s goal of creating jobs for 9 million people, and an additional 4.44 million rural migrant workers were employed. In short, more jobs were created.
The Fundamental Principle of Steady Growth, Policy Consistency and Greater Vitality Would Continue to Be Implemented in the Second Half of the Year.
In the face of slower economic growth in the first half of the year, China will continue to implement the fundamental principle of securing a steady economic growth, continuing its effective policies and reinvigorating its economy in the second half of the year. It will continue to optimize its economic structure and pursue a steady economic growth. Both are indispensable.
Steady growth:Itis expected that the third quarter would see the same economic growth rate as that of the second quarter, if not slightly higher. However, the possibility of a down slide in the fourth quarter is still there.Should main production entities follow the general trend of economic transformation and upgrading, take advantage of innovation-driven development and reform dividend, and generate new growth-driving factors, China is likely to achieve a 7.5% growth rate for this year. But, if they stick to their original growth model while passively waiting for the government’s relief or a change of its policy, the growth target set for this year would be difficult to attain and we could only expect a 7.2% growth rate for the year.
Policy consistency:To achieve its strategic goal of keeping the current growth level and facilitating future development, this government will not change the course of economic transformation and restructuring or introduce new regulatory policies to bailout or support the market, because of the down-sliding economic indicators. The government will, in fact, seek a steady growth in the course of economic transformation and upgrading by improving the market economy, exploring new-type urbanization, expanding service consumption and looking for export-oriented growth-driving factors so as to ensure a mutually beneficial and mutually complementary economic development.
Economic renewal:The central government will introduce a series of policies and measures to promote both economic transformation and economic renewal. These policies and measures will afford new opportunities and new driving force for economic growth in China.
First, to promote consumption with special efforts to encourage and guide a rapid growth in information consumption he State Council has decided that the remaining three years in the 12th Five-Year Plan period will see a growth of information consumption by over 20% each year on an average. According to a preliminary estimation, the information consumption would reach 3.2 trillion Yuan and an additional output value of the relevant industries would exceed 1.2 trillion Yuan by 2015. Clearly, this would not only facilitate the upgrading of consumption, but more importantly, it would help generate new economic growth points. Therefore, this is an important measure that would benefit both industrial transformation and people’s livelihood.
Second, to find new driving force for the export-oriented economy and add substance to the strategy of “going out” and the policy of “bringing in foreign investment and expertise”. In this regard, we could adopt following main measures: establish the Shanghai Free Trade Pilot Zone in which to conduct a pilot project for upgrading reform and enhancing opening-up; restart the negotiations on a China-U.S. investment treaty, which may offer an opportunity for major changes to China’s foreign investment management system. China will open much wider to foreign investment, replacing the past practice of making provisions on areas in which foreign investment is welcomed with providing only for no-foreign-investment areas.
Third, to work out programmes for a new round of urbanization and expand the growth space for relevant industries in urban areas, top priority should be given to people’s interests in this new round of urbanization endeavour and efforts should be made to incorporate rural migrant people into urban residents in an orderly manner.
Fourth, to adopt a flexible approach, including eliminating the minimum credit limit, keeping the home mortgage rates as they are and continuing some measures while eliminating others. The Central Bank of China will no longer control the interest rates on loans, which will help lower the cost for social financing and encourage economic activities. This measure is designed more for a steady economic growth. On the other hand, the policy not to change the current home mortgage rates demonstrates that the government has not wavered in its determination to reduce the real estate bubbles and restructure its economy.
Qi Jingmei is a Researcher in the Department of Economic Forecasting at the State Information Center of China.
