July 14th, 2012 | China Daily Growth declines to 3-year low
Economy is stabilizing and will recover in second half, analysts say
The growth of China’s economy fell in the second quarter to its slowest rate in more than three years, pushing the government to highlight “stabilizing growth” as a more important goal in the coming months.
“Both the monetary policy and fiscal policy still have space to be adjusted to support the economic rebound,” said Sheng Laiyun, spokesman for the National Bureau of Statistics.
The bureau on Friday announced that GDP had grown 7.6 percent in the second quarter from a year earlier, the sixth consecutive quarter of slowing growth.
For the first half of the year, the GDP climbed 7.8 percent year-on-year, compared with 9.6 percent in the same period last year, according to the bureau.
“The full-year growth target of 7.5 percent can be achieved and we have no reason to lose confidence,” Sheng said.
Lu Zhengwei, chief economist with the Industrial Bank, said that some signals, including fixed-asset investment and domestic consumption, show that the economy is being stabilized and should soon be back on a faster growth trend.
“As policies will be continually eased, GDP growth may rebound to 7.8 percent in the third quarter, and there is no more need to cut interest rates,” Lu said.
The slowdown of China’s economy is in line with the deterioration in other major emerging economies — Brazil, Russia, India and South Africa — which together with China are known as the BRICS nations.
Economists from Nomura International have lowered the forecasts of the year-on-year GDP increase for emerging countries, with an estimated 2012 growth rate of 1.9 percent for Brazil, 5.5 percent for India and 1.7 percent for South Africa.
Meanwhile, the United States may grow 2 percent while the eurozone is expected to contract 0.7 percent, according to a Nomura research note.
“At a time when the eurozone is in trouble, US fiscal stimulus has been pushed as far as it can be, and growth is weak in China, Japan, India, Brazil and other important economies,” said Sebastian Mallaby, director of the Center for Geoeconomic Studies.
GDP: Policy measures ‘will remain proactive’
“The world needs stimulatory policies from major economies that have a strong enough financial position to deliver them safely. China should lead in this respect,” Mallaby said.
With the policy fine-tuning in the coming months, China can contribute more to the global recovery while rebalancing the economic structure away from investment and toward consumption, said Derek Scissors, a senior research fellow at The Heritage Foundation.
“If China’s GDP growth slows but it also rebalances, that is a much greater contribution to the world economy than fast, unbalanced growth,” Scissors added.
However, Wei Jianguo, secretary-general with the China Center for International Economic Exchanges, a government think tank, expressed concern.
“As overseas demand is still very weak and domestic consumption is increasing at a slow pace, the worse time for China’s economy may not have come yet,” Wei told China Daily in an interview.
Wei, also a guest economist of China Daily, suggested launching more stimulus measures to boost exports in the short term and keep a “reasonable” investment speed.
A report released on Friday by the People’s Bank of China said “the proactive fiscal policy and the prudent monetary policy will continue in the next stage”, as the complex world economic situation is adding instability and uncertainty to the global recovery.
The positive news for the financial sector is that China’s bank lending in June turned out to be stronger than expected, with new lending of 920 billion yuan ($144 billion), as the central bank cut rates for the second time in a month, said Duncan Innes-Ker, an analyst with the Economist Intelligence Unit, an economic forecasting and advisory agency based in London.
“It should support an acceleration of investment growth in the second half of 2012,” he said.
On Friday, the Ministry of Finance released figures for fiscal revenues and expenditures in June. Influenced by the slower growth and shrinking profits for enterprises, fiscal revenues rose 9.8 percent from a year earlier, compared with 13.1 percent in May.
Sun Junwei, the China economist with HSBC Holdings, said in a research note that the government will be pressured to take more decisive easing actions to reverse the growth slowdown as it has sufficient room for further measures since inflation is falling quickly.