Business / Economy

Weakening momentum tests nation's resolve to restructure

By Zheng Yangpeng (China Daily) Updated: 2014-05-14 10:03

"If the government still believes that achieving a 7.5 percent growth target is important for its credibility, China's monetary policy will have to play its necessary role by easing further in order to help pull the economy out of a state of lethargy," Liu Ligang and Zhou Hao, analysts at Australia and New Zealand Banking Group Ltd said in a report.

Weakening momentum tests nation's resolve to restructure
Jan, Feb figures show chill in economy 

Weakening momentum tests nation's resolve to restructure
China's April services growth quickens slightly

But Niu Li, a senior economist with the State Information Center, a government think tank, said it takes at least three months for central government stimulus policies to take effect, and latest measures were only announced in early April.

"The key is, you have to understand the reasons behind China's slowdown. Major problems remain, including overcapacity, housing market adjustment and local governments' mounting pressure to repay massive debts they took on in the past few years.

"Unless these problems are solved, it's pointless to stimulate. We've seen this happen before: Growth picks up after a government stimulus but then soon drops," Niu said.

He contended that it's not a major problem if GDP growth falls short of 7.5 percent, as long as structural problems are tackled.

Chen Hufei, an economist at Bank of Communications Ltd, said detailed NBS numbers for April showed that although industrial output growth has dipped, conditions are much better at the downstream end of industrial chains than at the top.

As processing trade activity improves, downstream sectors will pick up this month and next, helping pull up industrial output from the April basis.

Premier Li Keqiang said last week in a speech in Nigeria that China has the ability to achieve this year's growth goal.

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