The Chinese economy continues to strengthen in October after economic growth rebounded in the second quarter, confirming a stabilizing economy as China strives to shift its growth model to a more sustainable one.
Retail sales, one of the three main growth drivers for the Chinese economy,rose by 13.3 percent, unchanged compared with September. Growth of urban fixed-asset investment edged down slightly during the first 10 months to 20.1 percent, compared with the 20.2 percent for January to September. Exports witnessed a surprising jump of 5.6 percent year on year, reversing the decline of 0.3 percent in September.
Industrial output increased by 10.3 percent year on year compared with 10.2 percent in September. The increase was led by an 11.4-percent increase in manufacturing, indicating stronger activities in the sector.
Steady consumption and investment demand, expanding industrial production growth and a rebound in exports all suggest that China's growth recovery is consolidating.
Discussions of an economic slowdown of the Chinese economy has intensified in recent months as the country's economy now grows at a more moderate 7.5 percent rate after years of double-digit growth.
Improving October indicators, together with the rebound of China’s economic growth to 7.8 percent in the third quarter, helped build market confidence and ease concerns that structural reform might further slowdown in the world’s second largest economy.
China's new leadership has been pressing ahead with transforming its growth model towards a consumption-led one from an export- and investment-led one. Under such policy environment, China’s economic growth has been consciously slowed down, which economists believe is an inevitable and worthwhile choice to make.
“China used to primarily focus on fast growth and large scale (of economic development), which although brought us 30 years of at least 10-percent growth, also resulted in massive energy consumption, low production efficiency and lack of refined management strategies and innovation,” said Zhao Xijun, vice dean of the School of Finance at Renmin University of China. “If we continue to go down this path, the anticipated economic collapse might actuallycome true,” said Zhao.
According to Zhao, China’s economic development path can be seen as a process from quantitative to qualitative changes. China has entered the stage of qualitative change, during which growth quality, competence and competitiveness, instead of growth rate, should be valued more. From this aspect, China is witnessing improving indicators including lowering energy consumption and increasing production efficiency, said Zhao.
“Therefore, our economy is not heading towards a collapse, but rather an advanced level with higher quality,” said Zhao.
Ding Yifan, aresearcher at a top government think tank, shared Zhao’s view.
Ding, deputy director of the Institute of World Development of the Development Research Center of the State Council, also thinks the current growth rate level of about 7 percent is reasonable. “The current growth rate allows China to effectively implement its economic transformation policies,” said Ding, “We actually don’t want China’s economy to growth too fast, because it would bring many negative impacts such as high inflation.”
Although China’s recovery momentum is stronger than previous expectations, its sustainability lies in the success of the country’s structural reform. Economists believe the deepening and broadening of the reform is the key to a sustained recovery and a more healthy growth model.
“Reform plays a vital role in taming the slowdown and reviving the economy. Unless major and substantial measures are taken in the reform, it can be difficult to thoroughly change negative economic conditions,” said HuoJianguo, president of the Chinese Academy of International Trade and Economic Cooperation, a think tank under the Ministry of Commerce.
The long-awaited third plenum of the 18th Communist Party of China Central Committee convened in Beijing last week. The meeting laid out a full package of economic reform, including giving prominence to the market, opening wider to foreign and private investors and building more free trade zones. These measures, hailed by investors and experts as breakthroughs, are expected to change China’s economic landscape in the next decade.
