Opinion / Xin Zhiming

China on track to recovery

By Xin Zhiming (chinadaily.com.cn) Updated: 2014-07-01 15:26

These policy measures are a sign of the policymakers’ stance that attaches importance to both restructuring reforms and delivering of stable growth rates. While economic reforms will inject fresh blood in the economy to ensure its long-term vitality, the short-term growth stabilization contributes to a stable job market and investor confidence, both of which are indispensible for the country.

Another encouraging sign comes from the real estate market, which continues to cool down but has not shown any catastrophic price falls.

The China Index Academy said that new home prices in 100 major cities fell by 0.5 percent in June month-on-month, the second month they registered a fall.

The fall may not be good news for real estate investors and speculators, but it no doubt benefits the country’s efforts to restructure the economic landscape centered on real estate and related sectors.

As home prices have soared for many years and hover at unaffordable levels, it has become difficult for China to deleverage its economy. It cannot allow home prices to continue to rise, but it cannot afford a sharp price correction in the sector, either, since it could bring about a chain effect affecting many related industries, ultimately dragging down the overall economy.

The moderate price correction in June indicates that - at least for now - policymakers have managed to balance the tasks of deleveraging and growth stabilization.

Admittedly, the situation remains precarious. Seen from the PMI sub-indexes in June, small and medium-sized enterprises, which are the major forces creating jobs, still face great pressure. The employment sub-index rose to 48.6, the highest level this year, but it remains below 50, which divides activity expansion and contraction.

Policymakers need to closely monitor the job market and save resources so as to be ready to tackle unexpected problems if the economy sours.

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