China’s economy grew by 5% in the first half of this year, but the foundation for economic stabilisation has yet to be laid, according to the Borneo Bulletin.
Weaker-than-expected second quarter results emphasised the need to strengthen both countercyclical and cross-cyclical macro policies to support the world’s second largest economy.
Counter-cyclical adjustments are mainly aimed at short-term measures to slow down the current trend. Cross-cyclical adjustments, on the other hand, are aimed at supporting long-term, sustainable growth with long-term solutions to address problems across several economic cycles.
The focus of policy should be on stronger fiscal and monetary stimulus to boost domestic demand, as well as measures to address structural problems and encourage new growth drivers, analysts said.
Data from the National Bureau of Statistics showed on Monday that China’s GDP grew 4.7 per cent in the second quarter from a year earlier, down from growth of 5.3 per cent in the first quarter of the year. China’s industrial production rose 5.3 per cent in June from a year earlier, while fixed-asset investment rose 3.9 per cent year-on-year from January to June.
Zhou Maohua, a researcher at China Everbright Bank, stated:
“The second-quarter growth fell short of market expectations mainly due to the slump in retail sales growth, while the robust investment in infrastructure and manufacturing and better-than-expected foreign trade provided strong support for economic stabilization.”
Addressing the issue
The NBS statistics showed that despite low growth in retail sales, a key indicator of consumer spending, retail sales of services registered relatively strong growth, expanding 7.5 per cent year-on-year.
China’s consumption and domestic demand will likely pick up steadily in the remainder of the year, with the help of stronger policy stimulus, spending sprees during holidays and gradual stabilisation in the property sector.
The country has recently taken a number of measures, such as reducing the minimum down payment for commercial housing mortgages for individuals, to stimulate the property market. Lu Ting, chief China economist at Nomura, stated that China was moving in the right direction in terms of solving housing problems.
“The country has already pivoted from building public housing to ensuring the delivery of numerous pre-sold homes to rebuild buyers’ confidence, marking a significant step forward toward reducing the woes of the property sector.”
China’s economy is expected to gain momentum for further recovery this year with an estimated annual growth rate of 5.3 per cent due to a recovery in external demand and supportive fiscal and monetary policies. This is above the country’s annual growth target of about five per cent, according to the ASEAN+3 Macroeconomic Research Office.
