No Hard Landing for China’s Economy

China’s National Bureau of Statistics released the latest macro-economy data of China in July, bringing concerns about a slowdown for China’s future growth engine and also arousing a drumbeat of negative views about China’s economy suffering a hard landing.

It is believed that China’s economic situation remains basically stable and with all these driving factors and leading economic indicators, the risk of a hard landing of China’s economy in the outlook period is low.

Although China’s economic growth had cooled for six straight quarters and dipped to 7.6%, the first time below 8% in three years, the GDP still grew by 7.8%, above the official growth target of 7.5%. The current slowdown in the economic growth is actually necessary for the transformation of China’s economic development and is in line with the macrocontrol expectations.

Besides, compared with other countries, China’s economic growth is still remarkable. In the second half of the year, the economy may see a stabilizing trend and the fullyear growth rate is expected to hold up at around 8%.

Therefore, there is no need to fear for a “hard landing”for China’s economy. Despite of the current downward pressure, China may still base on its abundant policy resources and national wealth to expand domestic demand, develop strategic new industries and explore new export markets, in response to the pressure from weakening external markets, and achieve steady growth.

In addition, China has made great improvements in its independent innovation capacity and all those outcomes from independent innovation will continuously fuel the transformation of China’s economic growth, with more emphasis on the quality and effectiveness of the macro economic sectors.

In terms of inflation rate, the CPI is declining steadily and the June CPI fell to 2.2%. The hiking of prices is being curbed and inflation pressure also being obviously moderated. However, as the CPI figure remains above zero, it is too early to say that Chinese economy has slipped into deflation.

In the first half of the year, the industrial added value of high-tech industries increased by 12.3%, 1.8 percentage points higher than the industrial added value of those enterprises above designated size, which was 10.5%. The June industrial added value rose by 9.5% year on year, a second rebound since May, indicating that the government’s policies of “stabilizing economic growth” are showing effects.

In June, the overall investment grew steadily in China and the infrastructure investment swung into positive growth. According to this month’s figures, China’s fixed asset investment for the first half of the year increased by 20.4% and picked up slightly from a 20.1% growth in May.

The amount of infrastructure investment added up to 2176.2 billion yuan, up 4.4% compared to the same period a year ago. Meanwhile, China’s real estate investment growth slowed sharply in June, showing that non-profit investment growth is accelerating.

As for consumption, China’s retail sales of consumer goods increased by about 14% and grew on a relatively stable basis. The consumption structure of the country is upgrading. However, it should be pointed out that as China is a populous country with relatively low per capita consumption, and the price of labor continues to surge in recent years, it will be a long period before the consumption level is lifted.

In the past, it was the cheap labor that backed up the long-term export growth. In the future, the growth of massive per capita consumption will continuously stimulate consumption growth, making it the primary power source for economic development.

China’s business climate index, a major gauge of the country’s macroeconomic outlook, dropped to 126.9, 0.4 points lower than the first quarter. The entrepreneur confidence index (ECI) in the second quarter was 121.2, down 1.8 points quarter-on-quarter. The performance of these micro-enterprises reflected that the macro economy is still booming.

To sum up, the statistics has showed that China’s investment in infrastructure has a continuous demand and stable return. Besides, residents’ consumption structure and the industrial structure can be further optimized and upgraded, which leaves a large room for the adjustment of Chinese economy. All these facts have proved that Chinese economy is still solid in foundation and is unlikely to suffer from a so-called “hard landing”.