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Transition of economy starts

By Liu Shijin  (China Daily)

13:13, August 28, 2012

Growth rate must be prevented from falling too low to guarantee successful transformation of economic model

China's economy grew by 7.6 percent in the second quarter of this year, continuing a downward trend that began two years ago. At such a time, it's important that we make the economy stable for the present to ensure that long-term development occurs.

The slowdown is the result of a number of short-term causes. More importantly, though, it portends a transition in the economy.

The short-term causes include the European debt crisis, which is putting pressure on China's exports, and an expectation of slow growth and domestic price fluctuations, which will lead companies to reduce their inventories. However, a more significant underlying cause is the fact that China's economic transition may have already started.

A few points call for special attention.

First, the Chinese economy's fast growth has been mainly fueled by investments and spending on infrastructure. In most years, real estate contributed about half of the gains. But such investing has slowed in the past two years

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