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China vows to keep 7.5% growth rate

Updated: 2013-07-31 13:58
By CHEN JIA in Beijing and ZHANG YUWEI in New York ( China Daily)

China's top leadership says it guarantees that the 7.5 percent growth target for this year will be met, despite the country's continuing economic slowdown.

President Xi Jinping made the remark on Tuesday chairing a meeting of the Political Bureau of the Communist Party of China's Central Committee to lay out economic strategy for the second half of the year.

The committee decided that China will "maintain steady growth, adjust economic structure, and forge ahead with reform" to guarantee that "this year's key tasks for economic and social development will be fullfilled".

According to a statement from the political bureau, major economic indicators for the first half are still in a reasonable range, despite extremely complicated domestic and international conditions.

Authorities believe the country still faces a "strategic opportunity" and has the conditions for steady and healthy economic growth. "The economy will maintain steady growth in the second half of this year", the statement read.

The committee also underlined the need to prepare for complex and difficult situations, as the global economic recovery has not been progressing well.

The government will maintain "stable macroeconomic policy, flexible micro policy and social policy that can support the bottom line", the statement said.

Policy fine-tuning will be possible at the right time, it added.

China's economic growth rate in the second quarter slowed to 7.5 percent from 7.7 percent in the first quarter, as leadership remains determined to transform development patterns and focus on long-term rebalancing.

Experts say that the slowdown shouldn't be read in a negative way and that it will be good for China, the world's second-largest economy, to maintain a more sustainable growth in the coming years.

"Too much attention is being given to monthly and quarterly movements in growth rates", said Yukon Huang, a senior associate with the Carnegie Endowment for International Peace, a Washington-based think tank.

"China is on a prolonged path in moving from double-digit growth rates to a more sustainable rate in the range of 7-to-8 percent. But given the excess capacity and high inventories built up during the post stimulus period, the decline may cause growth rates to dip below their longer- term norm," said Huang, adding that the real priority for Beijing is to "develop and move on the structural reform agenda, so markets should await the announcements which are likely to come out this fall".

Lionel Vairon, a former French diplomat who recently published a book entitledChina Threat? The Challenges, Myths, and Realities of China's Rise, said the Chinese government made the decision quickly to respond to sustain the growth.

"It is sustainable and acceptable for public opinion", Vairon said, adding that the Chinese government-as it has proved with a variety of challenges it has faced-is capable of adapting to a new challenge like this.

In the first half, the Consumer Price Index-a main gauge of inflation-increased by 2.4 percent year-on-year, compared with 3.3 percent in the same period of 2012, lower than the year's target of 3.5 percent.

The political bureau highlighted key areas to guide macroeconomic policy and focus on improving the quality of economic growth. It should:

Maintain a proactive fiscal policy and prudent monetary policy, and improve efficiency of fiscal funds to support the industrial economy;

Upgrade public consumption, maintain rational investment growth and encourage healthy development of the real estate market;

Strengthen policy support and services for small- and medium-sized enterprises, and remove administrative fees to ease the burden on small businesses;

Accelerate the development of information, energy conservation, environmental protection and newenergy industries, as well as boost emerging services;

Stabilize foreign trade, broaden exports and raise imports, while encouraging quali1 ed enterprises to invest overseas.

Analysts said more detailed measures are expected to be announced after the third quarter to improve structural reforms and release stronger driving power for economic growth.

"China is on the right track for economic reform," said Jean Pierre Petit, president of Green Economic & Financial Notebooks, a French economic research organization.

He was quoted by the French newspaper Le Monde last month saying that China has weathered the global financial crisis better than any other major country.

Addressing China's economic situation, Petit said an economic slowdown in the country could have a negative impact on the global economy.

But in the long run, China will welcome the shift from an investment- and export-driven economy to a model favoring consumption. "This is a welcomed trend," he said, adding that it was the right direction for the new leadership to take.

Vairon said that what the new government is doing by 1 ghting corruption is a good way to boost consumer con1 dence and help get the Chinese to spend more of their money.

Zhu Haibin, chief China economist with JPMorgan, expects "the economy's sequential growth momentum to stabilize and improve modestly in the second half.

"Not surprisingly, Premier Li Keqiang has reiterated maintaining the 7.5 percent growth target for 2013 ?with labor market conditions being the key area of concern," Zhu said, adding that the service sector was in better shape, but manufacturing was su7 ering from overcapacity.

While GDP growth slowed to 7.6 percent in the first half, growth in tertiary-sector GDP, which mainly reflects service activities, improved modestly to 8.3 percent year-on-year, according to the National Bureau of Statistics.

Possible fine-tuning by policymakers in the second half may see the central bank cut the reserve requirement ratio to supplement market liquidity if capital outflows increase, Zhu said.

Tuo Yannan in Brussels contributed to this story.

Contact the writers at chenjia1@ and