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Slowing economy prompts calls for reforms

(Xinhua)

08:26, July 16, 2012

BEIJING, July 14 (Xinhua) -- Whoever sees the half-year report on China's economy, whether they be policymakers or economists, would not view the figures as a glowing result for the world's second-largest economy.

Gross domestic product (GDP) in China expanded 7.6 percent year on year in the second quarter, easing below 8 percent for the first time in three years and marking the sixth quarterly decline in a row, according to the National Bureau of Statistics (NBS).

The GDP data in the second quarter took Chinese economic growth in the first six months to 7.8 percent year on year, which still surpassed the government target of 7.5 percent for the full year.

To some analysts, the slowest growth pace in three years showed China is facing increased risks of a hard landing.

But Sheng Laiyun, the spokesman for the NBS, said the 7.6-percent rate was "a fairly good speed" compared with other major world economies, and he was "full of confidence" about the prospects of China's economy.

Optimists consider the Chinese economy bottomed out in the second quarter, but the country still needs to continue reforms to solve problems that make its current development pattern unbalanced, uncoordinated and unsustainable.

"China must ensure its GDP growth does not to drop below 7 percent, otherwise high unemployment and other deeply-rooted social problems will emerge," said Wei Jie, a professor at Tsinghua University School of Economics and Management.

However, Wei himself opposed any massive stimulus such as the size of the 4 trillion yuan (634.92 billion U.S. dollars) in 2009 to stabilize growth in the world's second-largest economy since the bailout of the economy through massive stimulus "will only postpone problems and miss the opportunity to restructure the Chinese economy."

Responding to the current economic slowdown, the State Council, or China's Cabinet, adopted new measures encouraging private companies to invest in sectors such as banking, energy and transport -- which are currently dominated by state-owned companies.

The People's Bank of China (PBOC), the central bank, even announced a surprise rate cuts twice in a month, slashing the banks' benchmark one-year borrowing and lending rates by 50 and 56 basis points, respectively.

Pan Xiangdong, chief economist with Galaxy Securities, said the slowing GDP growth has outweighed inflation as the top concern for Chinese policymakers.

To stabilize growth in the short term, Pan said, China needs to rely on investment again, as exports are easily affected by the sluggish external demand while a significant increase in consumption will take time.

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