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Policy, Consumption-Expansion, Private Investment: Important for China's Economy

Data Analysis 01:09:44PM Jun 18, 2012 Source:SMM

BEIJING, June 18 (Xinhua) -- China's economy faces increasing downside risks as evidenced by the newly-released economic statistics for the January-May period.

China's exports in the first five months increased 8.7 percent year on year, lower than the annual 10-percent target, according to the General Administration of Customs (GAC).

China's fixed-asset investment rose 20.1 percent year-on-year to 10.89 trillion yuan in the first five months, marking the third consecutive monthly slowdown, according to the National Bureau of Statistics (NBS).

Together with the still grim real estate market and the bearish stock market, the economic data demonstrate that China's economy outlook could be gloomy.

Policy Fine-Tuning Taking Effect
The global economy is on the whole on the path of recovery, albeit the progress is very slow.

"Many people thought China's economic slowdown is out of expectation. I don't agree and I think it is totally within expectation," said He Keng, vice chairman of the Financial and Economic Committee of the National People's Congress.

Many governments have realized that it is important to boost the real economy, reduce imports and increase exports, which is of great significance to China's economy.

He said, "We cannot take radical steps under the current circumstances and it has been a unanimous view that China will not introduce another massive stimulus package like the 4-trillion one adopted in 2008."

He said that in the future more efforts should be made to expand consumption to facilitate self-geared growth, to implement the structural tax reduction to benefit enterprises, to guide and supervise banks to better serve the real economy so as to transform the economic development mode.

In the meantime, improving people's livelihood should be a top priority.

Cao Wenlian, deputy secretary-general of the China Center for International Economic Exchanges (CCIEE), said that economic statistics in May showed that the macro-policy fine-tuning has been taking effect as China's exports and property sector began to warm up.

With policies being drafted or introduced to expand investment, accelerate approval for construction projects, and support the private economy and small- and micro-sized enterprises, China's economy is likely to pick up at the end of the second quarter, Cao said.

He noted that the current policy fine-tuning measures will be enough for maintaining growth, and it is not advisable to adopt monetary and fiscal expansion policies as bold as those in 2008, warning against overreaction of additional and superimposed policies.

Cao added that it should be noticed that the current slowdown is more of an expected result of the macro-economic regulation besides the dwindling export demand.

Stimulate Consumption Step by Step
China's 12th five-year plan set the target to improve the proportion of people's income in the distribution of the national income and the proportion of labor remuneration in the primary distribution of the national income.

Reform in the income distribution policy has been bearing fruits with the relationship between people's income and the GDP moving towards a positive direction, said Fan Jianping, chief economist at the State Information Center.

In the past, the growth rate of people's income was lower than that of GDP when the economy grew rapidly, but higher than that of GDP when the economy slowed down.

The situation has changed. The GDP rose 8.1 percent year on year in the first quarter, 1.1 percentage points lower than the annual growth rate of 9.2 percent in 2011. But the disposable income of urban residents and the net income of rural residents in the first quarter rose 9.8 percent and 12.7 percent, respectively, compared to 8.4 percent and 11.4 percent for last year.

The most phenomenal feature of the consumption market this year is that the nominal growth rate is sliding while the real growth rate is on the rise slightly.

Expanding household consumption constitutes an important part of the strategic adjustment of the national economic structure.

Fan warned that China should not take rush steps to achieve quick success in expanding consumption, but should keep an eye for the long term.

For the time being, consumption remains stable and there is no need to boldly adjust short-term demand management policy to spur consumer demand, he said, warning that another round of stimulus policies for the real estate, auto, household appliance and tourism markets may foul up people's consumption speed and overdraft growth potential.

As for the real estate market, some people expect the government to loosen its tight regulation amid the economic slowdown.

He Keng said, "If the government relaxes its control, the property market will see a rebound, thus wavering China's economy as a whole."

Therefore, he said that China should keep its firm stance on the real estate market to prevent a rebound and draft property tax to guild reasonable consumption.

Create Favorable Environment for Private Investment
In the first five months, China's total investment rose 20 percent year on year, while its private investment rose 26 percent. And private investment contributed 80 percent of the 20-percent increase, according to Chen Yongjie, deputy secretary-general of the CCIEE.

Chen said, "Private investment is the largest contributor in stabilizing investment growth rate," so the government should take targeted measures to guild private investment into cash-strapped industries, such as education, service, and energy sectors.

Zheng Xinli, permanent vice-chairman of the CCIEE, said it is imperative to create a favorable policy environment for private investment and encourage private investment to go to previously monopolized sectors.

He also noticed that the "glass doors" in some sectors should be broken to enable private investment to enjoy the same taxation, land, credit, and project approval policies with state-run investment.

Moreover, Fan Jianping warned that some local governments may intensify tax collection and management efforts as their tax revenue decreased.

Fan said, "It will be harmful to the overall economy if local governments levy more taxes on enterprises at a time when they are in hardships."

He said local governments need to keep a sober mind amid the stagnant economy to better handle the relationship between government tax revenue and tax sources.

 

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Policy, Consumption-Expansion, Private Investment: Important for China's Economy

Data Analysis 01:09:44PM Jun 18, 2012 Source:SMM

BEIJING, June 18 (Xinhua) -- China's economy faces increasing downside risks as evidenced by the newly-released economic statistics for the January-May period.

China's exports in the first five months increased 8.7 percent year on year, lower than the annual 10-percent target, according to the General Administration of Customs (GAC).

China's fixed-asset investment rose 20.1 percent year-on-year to 10.89 trillion yuan in the first five months, marking the third consecutive monthly slowdown, according to the National Bureau of Statistics (NBS).

Together with the still grim real estate market and the bearish stock market, the economic data demonstrate that China's economy outlook could be gloomy.

Policy Fine-Tuning Taking Effect
The global economy is on the whole on the path of recovery, albeit the progress is very slow.

"Many people thought China's economic slowdown is out of expectation. I don't agree and I think it is totally within expectation," said He Keng, vice chairman of the Financial and Economic Committee of the National People's Congress.

Many governments have realized that it is important to boost the real economy, reduce imports and increase exports, which is of great significance to China's economy.

He said, "We cannot take radical steps under the current circumstances and it has been a unanimous view that China will not introduce another massive stimulus package like the 4-trillion one adopted in 2008."

He said that in the future more efforts should be made to expand consumption to facilitate self-geared growth, to implement the structural tax reduction to benefit enterprises, to guide and supervise banks to better serve the real economy so as to transform the economic development mode.

In the meantime, improving people's livelihood should be a top priority.

Cao Wenlian, deputy secretary-general of the China Center for International Economic Exchanges (CCIEE), said that economic statistics in May showed that the macro-policy fine-tuning has been taking effect as China's exports and property sector began to warm up.

With policies being drafted or introduced to expand investment, accelerate approval for construction projects, and support the private economy and small- and micro-sized enterprises, China's economy is likely to pick up at the end of the second quarter, Cao said.

He noted that the current policy fine-tuning measures will be enough for maintaining growth, and it is not advisable to adopt monetary and fiscal expansion policies as bold as those in 2008, warning against overreaction of additional and superimposed policies.

Cao added that it should be noticed that the current slowdown is more of an expected result of the macro-economic regulation besides the dwindling export demand.

Stimulate Consumption Step by Step
China's 12th five-year plan set the target to improve the proportion of people's income in the distribution of the national income and the proportion of labor remuneration in the primary distribution of the national income.

Reform in the income distribution policy has been bearing fruits with the relationship between people's income and the GDP moving towards a positive direction, said Fan Jianping, chief economist at the State Information Center.

In the past, the growth rate of people's income was lower than that of GDP when the economy grew rapidly, but higher than that of GDP when the economy slowed down.

The situation has changed. The GDP rose 8.1 percent year on year in the first quarter, 1.1 percentage points lower than the annual growth rate of 9.2 percent in 2011. But the disposable income of urban residents and the net income of rural residents in the first quarter rose 9.8 percent and 12.7 percent, respectively, compared to 8.4 percent and 11.4 percent for last year.

The most phenomenal feature of the consumption market this year is that the nominal growth rate is sliding while the real growth rate is on the rise slightly.

Expanding household consumption constitutes an important part of the strategic adjustment of the national economic structure.

Fan warned that China should not take rush steps to achieve quick success in expanding consumption, but should keep an eye for the long term.

For the time being, consumption remains stable and there is no need to boldly adjust short-term demand management policy to spur consumer demand, he said, warning that another round of stimulus policies for the real estate, auto, household appliance and tourism markets may foul up people's consumption speed and overdraft growth potential.

As for the real estate market, some people expect the government to loosen its tight regulation amid the economic slowdown.

He Keng said, "If the government relaxes its control, the property market will see a rebound, thus wavering China's economy as a whole."

Therefore, he said that China should keep its firm stance on the real estate market to prevent a rebound and draft property tax to guild reasonable consumption.

Create Favorable Environment for Private Investment
In the first five months, China's total investment rose 20 percent year on year, while its private investment rose 26 percent. And private investment contributed 80 percent of the 20-percent increase, according to Chen Yongjie, deputy secretary-general of the CCIEE.

Chen said, "Private investment is the largest contributor in stabilizing investment growth rate," so the government should take targeted measures to guild private investment into cash-strapped industries, such as education, service, and energy sectors.

Zheng Xinli, permanent vice-chairman of the CCIEE, said it is imperative to create a favorable policy environment for private investment and encourage private investment to go to previously monopolized sectors.

He also noticed that the "glass doors" in some sectors should be broken to enable private investment to enjoy the same taxation, land, credit, and project approval policies with state-run investment.

Moreover, Fan Jianping warned that some local governments may intensify tax collection and management efforts as their tax revenue decreased.

Fan said, "It will be harmful to the overall economy if local governments levy more taxes on enterprises at a time when they are in hardships."

He said local governments need to keep a sober mind amid the stagnant economy to better handle the relationship between government tax revenue and tax sources.