Economic ‘remedy’ eyes more than growth

26 April 2014

Xinhua, Beijing :
While people are eagerly betting on the future of a slowed economy in China, a senior official has said it may take a relatively long time for a string of policies announced recently to take effect as this Chinese "remedy" eyes more than buoying growth.
Fan Jianping, chief economist at the State Information Center under the National Development and Reform Commission, told Xinhua that these measures China adopted to stabilize growth will probably need more time than was required for the massive stimulus plans of the past.
"However, the measures this time will be more sustainable and be capable of spurring the internal impetus of Chinese economy," said Fan, adding that he did not take them as stimulus moves.
"The remedy, which I prefer to call them, targets more on boosting reforms, adjusting economic structure and enhancing people's welfare, although it can spontaneously impel growth," said the economist.
To address downward pressure, China has rolled out a series of measures over the past few weeks, including shanty-town renovation, railway construction, cleaner energy projects, tax breaks for small firms, support for rural finance and a wider opening of the market to private capital.
For Fan, private capital taking a bigger role in sectors once dominated by SOEs can not only tap investment potential but also help forge a market for different kinds of investors: an objective high on China's reform list.
In his view, China's focus on cleaner energy projects is also noticeable. "Investment in nuclear power plants or hydropower stations is huge. But more significantly, these projects can restructure the country's current energy layout, which is essential to curb pollution and safeguard energy security," said Fan.
Other measures as part of the "remedy" like government support for shanty-town renovation and affordable housing construction can partly offset the impact of a shrinking housing investment in the market.
Ordinary people can benefit more from this "remedy" than they could from previous stimulus policies, according to Fan.
"Therefore, the effects and time before the effects can set in may be quite different between recent moves and former stimulus plans," he predicted.
People may expect a policy to take effect immediately, but they should take a new perspective to weigh China's new remedy in light of the economic slowdown, he warned.
"China will not boost growth just for growth's sake and will not let today's stepping stone become tomorrow's stumbling rock," according to Fan.
Fan reiterated that the Chinese economy is within a proper range as four major economic indicators, including GDP growth, inflation rate, employment rate and balance of payments, have all stayed sound.
China's GDP rose by 7.4 percent year on year in the first quarter of 2014, beating popular market estimates of 7.3 percent.  The tertiary industry, which is a powerhouse for future growth, accounted for a larger portion of the GDP, indicating an ongoing restructuring in the world's second-largest economy.
Although increased food prices drove China's inflation at retail level to rise to 2.4 percent in March from 2 percent in February, Fan believes the inflation pressure still remained subdued.
In addition, more than three million new jobs in cities and towns were created in the first quarter, taking up more than a third of the yearly target.
China currently has a net capital inflow, showing that the country remains a magnet for foreign capital. A mild yet proper economic expansion creates room and time for China to realize its reform ambitions, Fan said.

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