Reassessing Growth

　　China’s economic growth slipped to 7.4 percentin the first quarter， signaling more downward pressurefor the world’s second largest economy. However，authorities have ruled out the possibility of majorstimulus to fight short-term dips in growth and plan toseek growth momentum through deep-seated reformsand reinvigorated domestic consumption.

　　The first-quarter growth rate marked the lowestquarterly growth level since the third quarter of 2012.But even so， the figure still outperformed the 6.6percent growth in the first quarter of 2009， during theglobal financial crisis.

　　“The figures suggest growth in the world’s secondlargest economy in the beginning of the year 2014was stable and that the economy was generally ingood health， as Chinese authorities are more focusedon reforms， restructuring and the improvement ofpeople’s well-being，” said Sheng Laiyun， Spokesman ofthe National Bureau of Statistics (NBS)， when releasingfirst-quarter economic figures at a press conference onApril 16.

　　China is shifting gear in terms of growth rates，adjusting its economic structure and digesting theafter-effects of previous stimulus packages. To shield itseconomy from the fallout of the global financial crisis，a 4-trillion-yuan ($644.4 billion) stimulus package waslaunched in November 2008.

　　China’s macroeconomy will inevitably come underdownward pressure in 2014. However， the ostensiblyweak data also contains positive factors， bolstered bymany achievements in economic restructuring.

　　Traditional industries such as steel and cementare experiencing a fall， while hi-tech industries showaccelerating growth. The share of gross investment inthe service industry and private investment continuesto rise.

　　Along with slowed industrial productiongrowth， the service sector continued to growin the first three months and made a largercontribution to GDP growth.

　　Target achievable

　　The Chinese Government has set a target ofaround 7.5 percent for economic growth in2014. It has said that a figure slightly above orbelow the target would be acceptable becauseits main focus is on creating jobs and improvingpeople’s well-being.

　　Earlier， when addressing the keynote speech tothe Boao Forum for Asia annual conference， ChinesePremier Li Keqiang emphasized that the Chinese Governmentwill not opt for a massive short-term stimulusbecause of temporary volatility.

　　“A growth rate under the 7.5-percent target is acceptableso long as sufficient creation of employment isensured，” Li said. “With all the principles established andpolicy options at our disposal， we can handle all possiblerisks and challenges，”Streamlining administration and further tax reformsare two of the options on the agenda.

　　A slew of more targeted pro-growth measures，including tax cuts for small and micro enterprises，greater support for shantytown renovation and moreinvestment in railways construction in underdevelopedregions， have been adopted in an attempt to achievesteady growth around its target without disrupting plansto restructure the economy.

　　Wang Jun， a senior researcher at the China Center forInternational Economic Exchanges (CCIEE)， said recentlyadopted pro-growth measures will definitelylift the Chinese economy.

　　“These measures aim to stabilize growth.I think the economic momentum will increasefrom the second quarter and there’s no needto worry that the economy will slide out ofcontrol，” Wang said.

　　Lu Zhengwei， chief economist with theIndustrial Bank， said GDP data is better thanexpected.

　　“Considering the government’s supportivemeasures that have just beenannounced this month， we expect growthto rebound to around 7.5 percent in thesecond quarter，” Lu said. “Going forward，further monetary policy loosening may notbe needed as the central bank has kept money marketrates relatively low.”

　　Zhou Hao， China Economist with the ANZ Bank， saidgrowth momentum has stabilized in March， despite thelackluster first-quarter data.

　　Ma Yao， a macroeconomy researcher with researchinstitute CI Consulting， said first-quarter figures can’trepresent the trend for the rest of the year or be used topredict the whole-year growth data.

　　“Many policies had just been formulated in the firstquarter. Major reform measures have yet to be fullyimplemented. The macroeconomy is bound to pick up infollowing quarters after those policies take effect.”

　　Reform-driven growth

　　The Chinese Government intends to prop up theeconomy through reforms， rather than by the traditionalmeans of eased monetary policy and progressive fiscalpolicy.

　　During his keynote speech at the Boao Forum forAsia， Premier Li identified reform as one of China’sgrowth engines for driving the Chinese economy.

　　If massive stimulus is an instant painkiller， reform islike minimally invasive surgery.

　　In 2013， a total of 416 administrative approval itemswere cancelled or delegated to lower governments bythe Central Government. Other reform measures， suchas business registration system and mixed-ownershipreform among the bloated state-owned enterprises(SOEs)， are underway to inject more vigor to the market.China’s reform efforts have already paid off. In 2013，the number of newly registered companies surged by27.6 percent.

　　Eyes on consumption

　　Upbeat consumption data is the biggest highlightamong the first-quarter results.

　　Consumer spending against the country’s GDP was64.9 percent in the first quarter， up 1.1 percentage pointsfrom the same period last year.

　　“Exports contributed less to GDP in the first quarterthan the same period last year. Meanwhile， the growth ininvestment is slowing from the previous quarter. Therefore，consumption’s contribution to GDP is on the rise，although the specific percentage is still under calculation，”said NBS spokesman Sheng.

　　“It’s premature to say the Chinese economy hasalready been transformed from investment-driven toconsumption-driven. But it’s definitely happening，” saidSheng.

　　People’s willingness to spend is directly connected toa stable job market and their deeper pockets.

　　Disposable income of urban residents increased7.2 percent in the first quarter and rural residents’ cashincome surged 10.1 percent during the same period.

　　Zhao Ping， Deputy Director of the ConsumerResearch Department under the Chinese Academy ofInternational Trade and Economic Cooperation， saidboosting investment alone will inevitably lead to overcapacity.

　　Only by combiningboosting investmentand expanding domesticdemand can the problembe solved.

　　China’s ongoing drivetoward urbanization boaststhe biggest potential forboosting consumption.

　　The State Councilreleased the NationalNew-Type UrbanizationPlan (2014-20) on March16. According to the plan，by 2020， 60 percent of thepopulation will be urbanresidents.