Chinese economy achieves soft landing

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Chinese economy achieves soft landing

(People's Daily Online) 15:30, November 07, 2013

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China’s economy has stabilized and is on the road to recovery, according to macro economic data and the recent Purchasing Manager's Index. According to Fan Gang, Vice president of China Society of Economic Reform, the lowest point of its dip has already passed, and the Chinese economy has succeeded in making a soft landing.

For more than a year growth in the Chinese economy had been slipping. Some foreign organizations were making gloomy predictions that in the first half of 2013 China’s economy might experience a hard landing with its growth rate dipping below 6 percent. However, recent economic data has challenged that negative view.

China’s PMI rose for the fourth straight month and reached 51.4 percent in October, hitting a new 18-month high and demonstrating China’s that manufacturing industry continues to stabilize and strengthen.

The “three locomotives” that drive economic growth are accelerating. Over the past three quarters, total retail sales have risen 11.3 percent year on year, 0.2 percentage points faster than in the first half of the year. Fixed-asset investment (excluding rural households) increased 20.2 percent, 0.1 percentage points faster than in the first half of the year. And in trade, the total value of exports and imports rose 7.7 percent, with the growth rate declining 0.9 percentage points from the first half of the year.

“The Chinese economy hit the bottom in the second quarter of 2013 and rebounded in the third quarter. After a new round of adjustments, China has succeeded in making a soft landing. The domestic economic growth rate will remain stable at 7.5 to 8 percent in the next few years,” said Fan Gang.

China took prompt and appropriate action in adjusting its economy to ensure a soft landing. Whenever the growth rate exceeds 9 percent, there is a risk of inflation and the government will apply damping measures.

“A downward shift towards 7 to 8 percent in China's economic growth rate is an inevitable trend. In the current situation, the economy cannot sustain a growth rate higher than 9 percent. China set its goal for economic growth at 7.5 percent at the beginning of the year, which is also the overall goal for the 12th five year development plan from 2011 to 2015. These are all targets appropriate to the current situation,” said Xu Hongcai, a senior economist with the China Center for International Economic Exchanges.

In order to achieve sustainable growth, the government is in no hurry to accelerate economic growth. Instead, China is addressing greater focus to adjusting the economic structure and promoting reform to stimulate endogenous power. The measures that have been taken to this effect are gradually having an impact.

At the same time, Xu Hongcai also put forward some suggestions: “In addition to Shanghai, more free trade zones should be established in China. I am looking forward to a possible wider deployment in the Third Plenary Session of the 18th Communist Party of China (CPC) Central Committee.” He also suggested reforms in other fields such as the deposit insurance system, interest rate liberalization, capital account liberalization, internal reform of the financial system, improvements to the loan guarantee system, and market access to private capital in the financial sector.

Edited and Translated by Yao Chun, People's Daily Online

Read the Chinese version: 中国经济基本实现软着陆, source: People's Daily Overseas Edition