After five years of double-digit economic growth, China on Wednesday set the tune of carrying out a "soft landing" to begin a new growth cycle, as Chinese policymakers gathered at the Central Economic Work Conference to tackle mounting difficulties in sustaining growth amid global financial tsunami.
Chinese President Hu Jintao addresses the Central Economic Work Conference in Beijing, capital of China, December 10, 2008. [Xinhua]
The central authorities pledged to strive for continued economic growth next year through domestic demand expansion and economic restructuring.
"Although the work meeting did not give a specific growth target for next year, the leadership made clear its resolution to sustain the growth at a relative fast rate and reiterated the macro-control policies to secure the goal," said Zhuang Jian, senior economist with the Asian Development Bank (ADB).
Chinese Premier Wen Jiabao addresses the Central Economic Work Conference in Beijing, capital of China, December 10, 2008. [Xinhua]
He said China's economy may need two and three years for adjustment after the fast growth cycle. He believed the economy could achieve an 8 percent growth rate next year.
The government developed a series of financial and tax stimulus plans since November to buffer the economic slowdown, as major economic indicators showed the country's real economy has been battered by the global financial turmoil.
The third-quarter economic growth rate slowed to 9 percent, the slowest pace in five years, and down from 10.6 percent in the first quarter. The November exports post the first monthly decline since June 2001, according to the General Administration of Customs.
Ba Shusong, deputy head of the Financial Institute under the State Council Development Research Center, said China's economic slowdown should not be simply attributed to the impact of the global financial crisis. Contributing internal factors include the transformation of the fast-growing mode driven by labor-intensive and high energy consuming development to more scientific and rational growth.
The expert pointed out the domestic consumption, especially the largely untapped rural market, would be a long-term driving force of sustainable growth.
China announced on November 30 its plan to expand a pilot program to subsidize rural residents in buying household appliances. The incentive program is offered to all rural areas in the country, where 900 million people live.
Yuan Shanchun, a farmer in Xibeiyu Village, east China's Shandong Province, where the program was piloted, was the first to benefit from the program when it began in April. He received 241.15 yuan of government subsidy half month after buying a refrigerator priced at 1,878 yuan.
Within half a year, another 100 households in his village followed his suit to buy new TVs, washing machines and refrigerators.
"Most of the farmers made their first purchases of the luxuries, like me," said Yuan, who found the fridge can keep food more fresh and hygienic than his backyard storage.
Experts estimated that the incentive would effectively boost 920 billion yuan of rural consumption on home appliances in the next four years.
"There is still a large room for the government to mull more policies to boost consumption, such as raising the threshold for taxable income and increasing income for lower-income earners," said Cai Zhizhou, an economist with Peking University.
Guo Tianyong, head of the Research Center of China Banking Industry affiliated to the China University of Finance and Economics, said both China's producer price index (PPI) and consumer price index (CPI) figures are at low levels, which leaves more room for interest cuts, as the government adopted a "moderately easy" monetary policy at the work meeting.
Since October, the Chinese leadership has made a broad push for expanding domestic demand.
The People's Bank of China announced tax exemptions and downpayment cuts in October to boost the falling real estate sector. A month later, the central bank slashed the interest rate by 108 basis points, the steepest cut in 11 years.
The State Council, or Cabinet, announced a monetary policy shift with a 4 trillion yuan ($586 billion) government spending package to help the economy ride out the global credit crisis.
Zhuang Jian, the ADB economist, said many of China's macro-control policies and economic stimulus would yield effects in the second half of next year reviving the overall economic vitality.