BCN-15, 16, 17 China signals greater focus on economic stability : Economic Watch

290

ZCZC

BCN-15

CHINA-ECONOMY-STABILITY

China signals greater focus on economic stability : Economic Watch

BEIJING, Aug. 3, 2018 (BSS/Xinhua) — A key meeting has signaled that
China will put more focus on maintaining the stability of the economy in the
second half of this year amid external uncertainties.

China will keep its economy on a stable and healthy development track with
proactive fiscal policies and prudent monetary policies in the second half,
according to a meeting of the Political Bureau of the Communist Party of
China (CPC) Central Committee on Tuesday.

With a robust growth of 6.8 percent for the Chinese economy in the first
half, the policy tone set by the CPC meeting will make sure that the country
achieves its annual growth target of around 6.5 percent, economists believe.

STABILITY: KEY THEME

China’s economy maintained steady growth with good momentum in the first
half. However, “the economy faces some new problems and challenges, and the
external environment has changed notably,” said a statement released after
the meeting.

It said, “efforts should be made to keep employment, the financial sector,
foreign trade, foreign and domestic investments, and expectations stable.”

China’s GDP growth has stayed within the range of 6.7 to 6.9 percent for
12 straight quarters. But a slight weakening was spotted in June in
industrial output and investment, and worries have been on the rise that
escalating trade tensions could bite into the economy in the future.

“The whole meeting sent a message that the country will move proactively
to cope with changes. Stability will be the key policy tone and theme of the
economic work in the second half,” said Wang Jun, chief economist of the
Zhongyuan Bank.

Policy makers have already announced a basket of pro-growth policies from
targeted lending to tax breaks.

MORE/HR/0904

ZCZC

BCN-16

CHINA-ECONOMY-STABILITY 2 BEIJING

China’s cabinet last week decided to roll out a 65-billion-yuan (nearly 10
billion U.S. dollars) tax cut to encourage businesses to spend more on R&D,
on top of an initial goal of cutting taxes and fees by 1.1 trillion yuan this
year.

Fiscal policy should play a bigger role in expanding domestic demand and
structural adjustments, according to the CPC meeting. It also pledged to
maintain control over the floodgates of monetary supply and keep liquidity at
a reasonable and ample level.

REFORM: SOURCE OF VIGOR

While external pressure increases, the vitality of the market could be
boosted by further domestic structural reform and opening up.

Supply-side structural reform should be pushed forward, according to the
CPC meeting. Strengthening areas of weakness should be taken as an important
task in the reform, it said.

Zhang Yansheng, the chief researcher with China Center for International
Economic Exchanges, believes new investment demand should be formed in such
“weak areas” as innovation, green development, and social welfare.

In reducing industrial capacity, another major front of the structural
reform, “some deep-rooted problems should be solved, including disposing
zombie firms and improving corporate efficiency,” Wang said.

Li Zuojun, deputy director of the resources and environment policy
institute of the Development Research Center of the State Council,
highlighted reforms in areas including state-owned enterprises and land
systems, which have both profound influence and quick effects.

Wang Hongju with the Chinese Academy of Social Sciences (CASS) called for
more rapid implementation of opening up policies.

“Reforms in government services, property protection, market access,
prices of production factors, and industrial policies will help China form
new global competitiveness,” he said.

SUPPORTIVE FINANCE, CURB ON PROPERTY

Policymakers aim to accomplish the dual-task of taming financial risks and
promoting the sector to play a more significant role in bolstering the real
economy, in particular, cash-hungry private and small businesses.

MORE/HR/0906

ZCZC

BCN-17

CHINA-ECONOMY-STABILITY 3 LAST BEIJING

“China must better combine the task of forestalling and defusing financial
risks with serving the real economy,” according to the meeting.

Despite progress in risk control and deleveraging in the first half, the
financing difficulties for private and small firms still lingered, and a
reasonable liquidity level is needed, said Zeng Gang, a financial researcher
with CASS.

Analysts believe more efforts are required to precisely channel the
capital into weak areas and prevent it from turning into hot money for the
home or equity markets.

Meanwhile, authorities showed firm resolve in regulating the property
market. The CPC meeting said “rises in home prices should be firmly curbed,”
and that the establishment of a long-term mechanism to promote the stable and
healthy development of the property market should be accelerated.

Housing prices in major Chinese cities were stable in June due to property
controls. However, structural problems remained as several third- and fourth-
tier cities have experienced price spikes since the year’s start.

“The meeting demonstrated the central leadership’s confidence and
determination in resolving the problems in the property market,” said Ni
Pengfei with CASS.

BSS/XINHUA/HR/1008