GDP growth is stable, structural changes are on the way

Second, in order to remove the hidden danger of a possible burst of the real estate bubble, the sector can hardly go on to be the main driver of GDP growth.

Third, the traditional pattern of economic growth is to motivate private funds by tax and bank saving into government investment, but with the decrease of investment effectiveness and the need of removal of excess capacity, the decrease of investment can drag on economic growth for quite a long time.

In short, the economy still suffers impact from negative factors such as the removal of product capacity of the manufacturing sector and weakening of real estate, we also note that there are some short-term positive changes, such as stabilized real estate sales and warmer consumption.

Looking forward, although we do not deny that the current economy still has some downward pressure, there are reasons for optimism:

First, the government on many occasions stresses a steady growth and many executives set the tone for the whole year's GDP growth rate of around 7 percent. Since last year, China's leaders are in line with the previous "new normal" statement and stressing "bottom line thinking", to ensure that the economy does not suffer systemic risk, but also give full consideration to employment needs. Taking into account the government's financial strength and strong executive power, the economy will maintain steady growth. The debt exchange, the promotion of PPP in infrastructure and other stabilization measures will make investment at an acceptable level.

Secondly, with new mortgage policy, repeatedly cutting interest rates and decreasing bank deposit reserve ratios, domestic real estate sales will show signs of recovery in the short run.

Finally, the exchange rate is an important factor affecting external demand, but over the past few months the factor is gradually improving. Although external demand uncertainty remains strong, exports in 2015 will remain high.

It is worth noting that since the end of June the stock market fell sharply, which may affect consumption, especially real estate sales. As the government takes action to save the stock market, the market is temporarily stabilized and likely to continue to rise. But the uncertainty remains.

China hopes to develop a sound multi-level capital market, but on a global scale success stories are scarce. It is easy to encourage people to launch a start-up, but it needs time to start a business. Bubbles can be created in a short time, but companies need to grow over a relatively long period.

The government needs to focus on building market rules, which requires patience. Meanwhile, to maintain stable economic growth may be important to avoid systematic risk, but excessive administrative intervention delayed restructuring of the economy. How to balance two sides of administrative intervention requires skills.

The author is a lecturer at the Management School of the Shanghai University and a research fellow at the China Europe International Business School Lujiazui International Finance Research Center. The views do not necessarily reflect those of China Daily.

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