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China’s economy likely to follow ‘L-shaped’ path in coming years, says an 'authoritative insider'

(People's Daily Online)    17:02, May 09, 2016

China’s economic growth trend in the coming years will be “L-shaped” rather than “U-shaped” or “V-shaped,” according to an "authoritative insider" who conducted an exclusive interview with People’s Daily.

The Q&A with the insider receives lots of attention, since the "authoritative insider" is presumed to be high-level officials.

The year 2016, which marks the start of China’s 13th Five-Year Plan, plays a decisive role in the journey to build the country into a moderately prosperous society. Chinese society is also now poised to arrive at the final success of supply-side structural reform.

Although the economy saw a good start in growth, structural optimization and standard of living in the first quarter, a number of difficulties still lie ahead. Such potential difficulties include overcapacity, bad loans, local government debt, a property bubble and illegal financing.

Thanks to weak demand and overcapacity, the “L-shaped” recovery is projected to last more than two years, the insider said. But the source also pointed out that China's economic growth will not drop abruptly given its potential, resilience and room for maneuvering. “We shouldn't be overly excited about some rebounding indexes, nor should we be overly panicked about some falling ones,” the person was cited as saying.

Though the overall economy is recovering, regional imbalance remains, with the coastal areas seeing a stronger recovery as the northeastern, central and western areas encounter bottlenecks. The source explained that such imbalance is inevitable along the path of economic development. Sectors with high returns usually attract more resources, but at the same time this gives rise to competition and overcapacity. When that happens, some areas utilize resources in order to innovate, while others wait for better luck. The imbalance, therefore, emerges.

The authoritative insider also emphasized that an imbalance is not such a bad thing, as those regions, industries and enterprises that manage to stand out will become prosperous, while those that lag behind can draw lessons from their failures. 

This article is edited and translated from 权威人士谈当前中国经济 Source:People's Daily

(For the latest China news, Please follow People's Daily on Twitter and Facebook)(Editor:Hongyu,Bianji)

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