First quarter data an encouraging sign

Editor’s note: China’s 6.7 percent GDP growth rate in the first quarter of this year may be the lowest since 2009, but it also suggests the second-largest economy is firmly moving toward sustainable growth. Following are some media outlets’ interpretations of the firstquarter data: Xinhuanet.com: Despite being slightly lower than the growth rate of the fourth quarter of last year, the 6.7 percent GDP growth is still within the 6.5 to 6.7 percent growth range set by the central government for 2016. Perhaps because of the emerging positive signals, the International Monetary Fund recently raised its forecast for China’s growth in the next two years by 0.2 percentage points, compared with its lowered growth forecast for many other economies.

More and more signs indicate China’s economic recovery has gained pace. In fact, China’s industrial production, fixed-asset investment and consumption have seen a steady rise.

Sheng Laiyun, a spokesman for the National Bureau of Statistics, says that judging from the positive changes of these key indicators, we can safely conclude that a good start has been made for China’s economic growth for the whole of 2016. Other analysts, too, believe China’s economy will stop sliding and, instead, begin to stabilize as more signs point to domestic enterprises facing a better future.

But Zhao Xijun, deputy director of the School of Finance, Renmin University of China, says more time is needed to make an accurate judgment about the future trend of China’s economy, because non-governmental investment is not so good despite the accelerated growth in investment. So, Chinese policymakers should find ways to increase such investments.

Although the Producer Price Index stayed generally above 50 percent, small and medium-sized enterprises still face a hard time, which means the government has to make greater efforts to activate their business activities. Nevertheless, China should focus not only on the rate of its economic growth but also the quality of growth. Chinanews.com: Although the 6.7 percent growth is slightly lower than that in previous quarter, China’s macroeconomic performance is better than market expectations in terms of composite prices, fixedasset investment, and total currency and credit volumes. Despite the slight decline, the 6.7 percent growth in the face of complicated economic circumstances at home and abroad testifies to the government’s admirable macro-regulation capability.

Aside from improving macroeconomic indexes, people have confidence in China’s economy also because of the smooth progression of the ongoing economic restructuring, which includes intensive fiscal policies comprising increased infrastructure investment, the recovery of the real estate sector and a loose monetary policy that has reduced enterprises’ financing costs.

But there is no reason to be over-optimistic about the dynamics of the “economic recovery”. The encouraging first-quarter data, to a large extent, should be attributed to the increase in real estate and infrastructure investments, which are closely related to the loose monetary policy.

Whether or not China works out follow-up financial and tax policies will decide whether its economic recovery will continue. But in the context of the ongoing economic restructuring, the evidently improved economic situation will give China a bigger space to implement the needed reforms. Shanghai Securities News:

Even before the publication of first-quarter data by the National Bureau of Statistics, a series of positive signals, such as the rise in the official Purchase Managers’ Index in the past eight months and a considerable increase in non-manufacturing PMI, suggested a better economic performance.

The PMI of 50.2 percent in the manufacturing sector in March was seen by many as a sign of China’s economy gaining steam after bottoming out. Also, the 53.8 percent non-manufacturing PMI in March, an increase of 1.1 percentage points from February, indicated that its service sector had become more active.

In the short term, the stable economic recovery may lower the possibility of further interest rate cuts, thus easing the pressure for the yuan’s depreciation. But from the middle- and long-term perspective, whether China’s economic recovery will continue still depends on whether structural reforms are effectively implemented to make economic operations more efficient.