China is bracing for a decade of slower 7-8 per cent growth by taking forward a difficult transition process from “growth” to “efficiency” for its slowing economy, a senior government economic adviser said on Thursday even as he expressed confidence that the country would grow by 8 per cent in 2012.
China was putting in a range of stimulus measures this year, including spurring investments in infrastructure projects such as its high-speed rail network, to combat the slowdown in exports and its real estate sector, said Yu Bin, the Director General of the Department of Macroeconomic Research of the Development Research Center of the State Council, or Cabinet.
“China’s projected growth for the year will still reach 8 per cent,” he said, exceeding the government’s 7.5 per cent target.
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Mr. Yu said he expected growth in the second quarter of this year – official figures are expected on Friday – to reach 7.5 per cent. The economy grew 8.1 per cent in the first quarter, down from 8.9 per cent in the last quarter of 2011, marking a three-year low.
He painted a bleak picture for the near-term for the Chinese economy, describing a sharp slowdown in the export-hit coastal east, which has driven the growth story these past three decades, but also expressing hope about middle and western China which he said would emerge as a future driver of an economic transformation away from export-led growth.
In the first half of this year, Mr. Yu said imports grew by 6.7 per cent and exports by 9.2 per cent, a decline of 20.9 per cent and 14.8 per cent respectively from the same period last year. “We expect a slowdown tendency in the first half of this year,” he said, “but we project export growth to pick up and reach around 10 per cent for the whole year.”
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Mr. Yu said that “fundamental factors sustaining economic growth have changed” after more than 30 years, with the government expecting only 7-8 per cent growth in the coming decade, down from the nearly 10 per cent average seen since 1980.
“We need a quite obvious shift from previous policies,” he said. “In the past, the focus was to maintain growth, employment and stability. In the new era of growth, we should identify the macro policy priority as maintaining growth efficiency and preventing risks.”
In 2012, with growth slowing as a result of the continuing slowdown in the West and a cooling real estate market at home on account of tightening measures, Mr. Yu said China would look to boosting investments, easing liquidity and economic reforms to push growth. He ruled out a major stimulus package such as the 4 trillion yuan measure in 2008. With inflation slowing to 2.2 per cent in June, the government had a wider range of policy options at its disposal.
“There is much lee way for China to unleash its potential if we relax restrictions, break monopolies and encourage competition,” he said.
“We are facing more pressing tasks in economic restructuring, and this is the major focus."
"An appropriate slowing down," he added, "is helpful to our efforts to transform the pattern of growth because only in such a period can we get industries to adjust their structure. So we do not need another stimulus.”