Plans for H2

A meeting held on July 30 by the Political Bureau of the Communist Party of China（CPC） Central Committee， the country’s top decision maker， diagnosed the Chinese economy in the first half of 2013 and painted a blueprint for the latter half. The central authorities will continue to work toward stabilizing growth， restructuring the economy and promoting reforms.

The meeting， chaired by Chinese President and General Secretary of the CPC Central Committee Xi Jinping， reaffirmed existing policy stances while allowing for fine-tuning policy.

China’s targeted GDP growth is 7.5 percent for the year and plans to add 9 million jobs to the economy. Statistics from the National Bureau of Statistics （NBS） show GDP growth in the first half slowed to 7.6 percent， with a 7.5-percent growth during the second quarter. A total of 7 million jobs were added to the job market during the first half.

With the growth rate in the second quarter falling right down to the government’s target for the whole year， there are mounting concerns that a continuous slowdown means China won’t meet its targeted GDP growth. Foreign observers also worry that a continuous slowdown will jeopardize global economic growth. Under this background， decisions made at the meeting will have vital significance for economic growth in the coming months.

Zhang Liqun， a research fellow with the Development Research Center of the State Council， said the meeting showed the intention of top policymakers to improve the quality of growth and shift the country away from a dependence on exports and investment and toward consumption.

Chu Jianfang， chief economist with CITIC Securities， agreed with Zhang， adding that the Chinese Government will not allow the economic growth to fall below the whole-year target of 7.5 percent.

Expectations

The news of China’s slowing growth during the first six months of the year caused a riot in the markets， with stocks further plunging. Many economists say the 7.5-percent growth in the second quarter is far lower than previous market expectations.

The Political Bureau meeting， however， praised China’s economic achievements in the first half， adding that major economic indicators were within a reasonable range and socioeconomic development was off to a good start. Economic growth in the first half was stable， with generally stable prices， a stable job market， and a bumper harvest for summer grains， read a statement after the meeting.

The meeting revealed the following， says Chu. First， it was a judgment on the Chinese economy. Despite a protracted slowdown， the Chinese economy is still in good condition， with easing inflation pressure and a stable job market. Second， the meeting reiterates that China will keep the annual growth target set at 7.5 percent. Third， the meeting pointed out no major adjustment will be made regarding macroeconomic policies but fine-tuning is allowed to maintain stable growth.

Chu said the meeting hinted at reforms in taxation and some other areas， and cutting down on government bureaucracy would likely come in the second half.

Despite mounting concerns from the market， the Political Bureau said they believe the country has entered a period of steady and healthy economic development， noting that the economy will maintain steady growth in the latter half of the year.

Focuses

Two priorities should be given to the Chinese economy in the second half. First， domestic demand should be expanded by stimulating consumption and investment. Second， deeper reform should be rolled out in cutting red tape and putting more power in the hands of lowerlevel governments to create more efficient economic growth， said Zhang.

He said maintaining stable growth should not rely on a one-off fiscal and monetary stimulus package， but rather combine sustaining growth with pushing forward transformation of the country’s growth pattern.

After three decades of breakneck growth， the Chinese economy has come to a stage where there is a need to restructure the economy away from its dependence on exports and manufacturing to one bolstered by consumption and services， which requires careful handling to maintain stable growth. On the one hand， the economic growth rate is declining； on the other hand， urgently needed restructuring and reform are a drag on growth.

Guo Shiliang， a financial commentator， said areas to watch in the Chinese economy for the remainder of the year are the real estate market and overcapacity. The meeting vowed to“promote the stable and healthy development of the real estate market，” a deviation from the previous stance of “further regulating the real estate market.”

Guo thinks this shows China’s intention to maintain economic growth by developing the real estate sector. As a pillar industry， the property market contributed 17 percent to government fiscal revenues. Also， the 42 industries and over 100 downstream industries associated with the real estate sector are the backbone for the national economy.

“The new attitude toward the real estate market is seen as a major transition in China’s property curbs. It’s an opportunity to let the real estate market be subject to market selfadjustment，” said Guo.

Industrial adjustments are a major means for the Chinese Government to upgrade the economy. Guo said the meeting sets the priority at solving excess capacity. Data from the Ministry of Industry and Information Technology show that iron， steel， cement and electrolytic aluminium are all in a state of overcapacity.

At the meeting， the top leadership pledged to transform the structure of many traditional industries， develop strategic emerging industries and accelerate the development of the IT and the service sectors.

“This will not only lower energy consumption and reduce pollution， but also create new growth drivers and push forward the upgrading of the country’s economy，” Guo said.

Top 10 Tasks

Continuing with a proactive fiscal and prudent monetary policy and directing financial support to the real economy；

Expanding domestic consumption， keeping reasonable investment growth， promoting urbanization， and maintaining stable and healthy development of the real estate market；

Maintaining a steady growth of agriculture output；

Further increasing financial services for small and micro businesses；

Accelerating industrial restructuring and adjustment， cultivating and developing strategic emerging industries， promoting information technology， environmental protection， new energy and the service sector；

Implementing regional development strategies；

Stabilizing foreign trade by expanding export channels and effectively coping with trade frictions；

Further cutting down on administrative bureaucracy and delegating more power to lower-level governments， accelerating fiscal， taxation and financial reforms， and pushing forward reforms of natural resource pricing；

Stabilizing commodity prices and mitigating the influence of rising prices on the day-to-day lives of the people；

Improving people’s livelihoods by offering more job opportunities， establishing an overall social insurance system that covers both rural and urban residents， and promoting the development of education， healthcare， culture and sports.

（Compiled by Beijing Review）