Pessimism over China's economy overstated

By Guo Yiming
0 Comment(s)Print E-mail, March 16, 2016
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Cautious optimism

Despite cheerful spirits, no one denies that the country which has delivered miracles in past decades is confronting a flurry of problems, giving ground for observers' pessimistic remarks.

"On the bright side, foreign pessimism serves as a wake-up call for China as the country faces more problems and daunting pressure," Jia Kang told the reporter. "On the other hand, we should not misinterpret those remarks and avoid drawing irrational conclusions."

Bearish arguments won't draw the economy into recession, but self-inflicted errors will, he added.

As China's supply-side reform becomes more targeted and systematic, without any major policy errors, the country's economy may bottom out and later stabilize against the major downward pressure, Jia suggested.

According to this year's government work report, to finish building a moderately prosperous society in all respects and double the 2010 GDP and per capita personal income by 2020, China's economy needs to grow at an average annual rate of at least 6.5% during the 13th Five-Year Plan (2016-2020) period.

The goal demands that China should maintain a medium to high growth rate, which, in Yi Gang's words, is achievable given China's current conditions. The vice governor of the country's central bank explained that ongoing urbanization, ever improving labor together with total factor productivity, and dividends unleashed by the policies of reform and opening up will provide momentum to underpin growth.

Supply-side reform has been the latest buzzword among Chinese leaders and economists as the country moves to address issues like excess capacity, housing overhang, and unprofitable "zombie" state-owned enterprises.

As the pioneer of "new supply-side economics," Jia pointed out that the powerhouse "has entered a 'new' phase shifting from high-speed to medium-speed growth," while the 'normal' pattern featuring structural optimization and quality improvement that supports the economic bottoming out is yet to come.

In his opinion, adjusting the population policy, reforming land, financial and educational systems, promoting innovation and entrepreneurship, reducing the operation costs of enterprises, reducing overcapacity as well as transforming government functions are what is needed to overhaul China's supply side which is dogged by various problems.

While admitting that the world, as a whole, is a community of common interests and shared future, vice finance minister Wang Guangyao urged coordinated policies among the major economies to overcome challenges amid global economic headwinds.

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