Plans for H2

　　The Chinese leadership sets the tone for China’seconomy in the second half of 2013

　　A meeting held on July 30 by the PoliticalBureau of the Communist Party of China(CPC) Central Committee， the country’stop decision maker， diagnosed the Chineseeconomy in the first half of 2013 and painteda blueprint for the latter half. The central authoritieswill continue to work toward stabilizinggrowth， restructuring the economy and promotingreforms.

　　Themeeting， chaired by Chinese Presidentand General Secretary of the CPC CentralCommittee Xi Jinping， reaffirmed existing policystances while allowing for fine-tuning policy.

　　China’s targeted GDP growth is 7.5 percentfor the year and plans to add 9 million jobsto the economy. Statistics from the NationalBureau of Statistics (NBS) show GDP growthin the first half slowed to 7.6 percent， with a7.5-percent growth during the second quarter.A total of 7 million jobs were added to the jobmarket during the first half.

　　With the growth ratein the second quarterfalling right down to the government’starget for the whole year， there are mountingconcerns that a continuous slowdownmeans China won’t meet its targeted GDPgrowth. Foreign observers also worry that acontinuous slowdown will jeopardize globaleconomic growth. Under this background，decisions made at the meeting will havevital significance for economic growth in thecoming months.

　　Zhang Liqun， a research fellow with theDevelopment Research Center of the StateCouncil， said the meeting showed the intentionof top policymakers to improve the qualityof growth and shift the country away from adependence on exports and investment andtoward consumption.

　　Chu Jianfang， chief economist with CITICSecurities， agreed with Zhang， adding thatthe Chinese Government will not allow theeconomic growth to fall below the whole-yeartarget of 7.5 percent.

　　Expectations

　　Thenews of China’s slowing growth during thefirst six months of the year caused a riot in themarkets， with stocks further plunging. Manyeconomists say the 7.5-percent growth in thesecond quarter is far lower than previous marketexpectations.

　　The Political Bureau meeting， however，praised China’s economic achievements in thefirst half， adding that major economic indicatorswere within a reasonable range and socioeconomicdevelopment was off to a good start.

　　Economicgrowth in the first half was stable，with generally stable prices， a stable job market，and a bumper harvest for summer grains， reada statement after the meeting.

　　The meeting revealed the following， saysChu. First， it was a judgment on the Chineseeconomy. Despite a protracted slowdown， theChinese economy is still in good condition，with easing inflation pressure and a stable jobmarket. Second， the meeting reiterates thatChina will keep the annual growth target set at7.5 percent. Third， the meeting pointed out nomajor adjustment will be made regarding macroeconomicpolicies but fine-tuning is allowedto maintain stable growth.

　　Chu said the meeting hinted at reformsin taxation and some other areas， and cuttingdown on government bureaucracy would likelycome in the second half.

　　Despite mounting concerns from themarket， the Political Bureau said they believethe country has entered a period of steady andhealthy economic development， noting thatthe economy will maintain steady growth in thelatter half of the year.

　　Focuses

　　Two priorities should be given to the Chineseeconomy in the second half. First， domesticdemand should be expanded by stimulatingconsumption and investment. Second， deeperreform should be rolled out in cutting red tapeand putting more power in the hands of lowerlevelgovernments to create more efficienteconomic growth， said Zhang.

　　He said maintaining stable growth shouldnot rely on a one-off fiscal and monetary stimuluspackage， but rather combine sustaininggrowth with pushing forward transformation ofthe country’s growth pattern.

　　After three decades of breakneck growth，the Chinese economy has come to a stagewhere there is a need to restructure the econ-omy away from its dependence on exportsand manufacturing to one bolstered by consumptionand services， which requires carefulhandling to maintain stable growth. On the onehand， the economic growth rate is declining； onthe other hand， urgently needed restructuringand reform are a drag on growth.

　　Guo Shiliang， a financial commentator， saidareas to watch in the Chinese economy for theremainder of the year are the real estate marketand overcapacity. The meeting vowed to“promote the stable and healthy developmentof the real estate market，” a deviation from theprevious stance of “further regulating the realestate market.”

　　Guo thinks this shows China’s intentionto maintain economic growth by developingthe real estate sector. As a pillar industry， theproperty market contributed 17 percent to governmentfiscal revenues. Also， the 42 industriesand over 100 downstream industries associatedwith the real estate sector are the backbone forthe national economy.

　　“The new attitude toward the real estatemarket is seen as a major transition in China’sproperty curbs. It’s an opportunity to let thereal estate market be subject to market selfadjustment，”said Guo.

　　Industrial adjustments are a major meansfor the Chinese Government to upgrade theeconomy. Guo said the meeting sets the priorityat solving excess capacity. Data from theMinistry of Industry and Information Technologyshow that iron， steel， cement and electrolyticaluminium are all in a state of overcapacity.

　　At the meeting， the top leadership pledgedto transform the structure of many traditionalindustries， develop strategic emerging industriesand accelerate the development of the ITand the service sectors.

　　“This will not only lower energy consumptionand reduce pollution， but also create newgrowth drivers and push forward the upgradingof the country’s economy，” Guo said.

　　By Lan Xinzhen