Opinion

Growth consolidation

(China Daily)
Updated: 2010-07-16 15:00

China's V-shaped rebound from the worst global downturn in more than half a century may be slowing a bit, with growth moderating to 10.3 percent year-on-year in the second quarter from 11.9 percent in the previous one. [June release of major economic data]

Fresh worries of a sharp slowdown are, however, simply misplaced given that China is the fastest growing among major world economies.

Related readings:  Slowdown 'may add' uncertainty  China's GDP grows 11.1% in H1  Q2 economic growth likely to slow to 10.6%  Q2 growth to slow as stimulus effects weaken

In fact, policymakers may actually welcome this deceleration as a way to prevent the economy from growing too fast and becoming overheated.

Besides, while Chinese policymakers can take some comfort from the temporary combination of double-digit growth and low inflation, the task of consolidating the country's growth prospects is no less demanding.

Since fiscal adjustments in advanced countries will only make the fragile global recovery more complicated than before, Chinese policymakers should be ready to push ahead with changes to the country's growth model in the face of extremely complex economic conditions both at home and abroad.

Latest statistics have confirmed that the first quarter indeed marked the cyclical peak for China.

After having bottomed out with a 6.2-percent growth rate in the first quarter of 2009, the slowest in a decade and coming squarely at a time when the global recession was deep-rooted, the Chinese economy accelerated to an 11.9-percent expansion in the first quarter of this year. Now, it has begun to slow a wee bit.

For global companies looking to China to drive demand amid weak sales elsewhere, such a moderation in the Chinese economy, which is poised to overtake Japan as the second largest one, behind only the United States, certainly mans a lot.

The dip in growth may stall the V-shaped economic rebound, but it is definitely not the end of China's rise as an important engine of global growth.

As debt-laden developed economies promise to cut fiscal deficits in the coming years, China has become the chief driver of global recovery by aggressively boosting domestic demand.

In the first six months, China's retail sales rose 18.2 percent and spending on factories and other fixed assets jumped by 25 percent over the same period last year. Such a strong surge in domestic demand has enabled China to maintain double-digit growth rates even while contributing to global demand by substantially slashing its trade surplus.

The current slowdown is therefore good news for the world, as it will make China's economic growth more sustainable.

Chinese policymakers may also heave a sigh of relief as the rate of inflation in June eased to 2.9 percent over a year earlier. This mild surge in consumer prices actually saves them the trouble of clamping down too hard by hiking interest rates.

Nevertheless, the country's promise to cut energy intensity by 20 percent between 2006 and 2010 has remained unfulfilled. And, efforts to increase incomes as a share of the GDP have made little progress as wage growth continued to lag tax revenues and corporate profits in the first half of the year.

Even so, policymakers must not slacken in efforts to promote energy-efficient and consumer-led growth.