16
JulHow to view the performance of China’s economy in the first half of this year? And what may the policy orientation be in the second half? A reporter from The Beijing News interviewed Liu Yuanchun, Vice President of Renmin University of China.
In Liu Yuanchun’s view, it is expected that China will meet economic growth fluctuation around 6.1% in the second half, and it will be sure for China to keep its economic growth not lower than “6%” as the baseline. He also pointed out, the investment data in June rose to certain extent, but many uncertainties exist and whether investment in the second half can be maintained to 6% is the key for whether the economy can be stable.
As for the policy orientation in the future, he thought, the positioning and orientation of the counter-cycle macro economic policy will remain unchanged, but policy intensity may be stronger and the focus may be subject to transfer to some extent.
The economic growth may fluctuate around 6.1% in the second half.
The Beijing News: How do you view the performance of China’s economy in the first half?
Liu Yuanchun: Against the backdrop of economic slowdown around the world and China-US trade friction, China’s economic growth of 6.3% in the first half highly went beyond estimates of many international figures and markets. Before the announcement of the rate, many people estimated that China’s economy would be under serious pressure this year, and thought that the economic growth rate would meet the point lower than 6. According to current data, however, the baseline of 6% growth rate has been held. Meanwhile, the goal of keeping job creation stable has been achieved, the results of consumption stability are encouraging, and the foreign trade is not as bad as many people imagined.
So, given the internal and external environment, such results indicate that China’s economy boasts really good elasticity and toughness, and that the counter-cycle macro economic policy control centering on “Six Stabilities” since Q3 last year has worked properly. In particular, the rebound of economic data in May and June reveals that the proactive fiscal policy on tax and fee reduction initiated from April enjoys immense popular support, and plays a decisive role in stabilizing market expectation.
The Beijing News: How will the economic trend of China be in the second half, as you estimate?
Liu Yuanchun: I really have confidence in our economic growth in the second half, because: first, the huge domestic market of China is still flourishing. In addition, the momentum that new growth drivers remain the ballast stone for toughness of China’s economy will continue.
We think, however, the downturn pressure will further aggravate in the second half due to rapid change of the international environment and a series of uncertainties. It is expected that the economic growth in the second half may fluctuate around 6.1%, and some regions and industries will meet heavier pressure, which will be reflected in the following aspects: 1. With global economy slowing down, particularly possible slower growth of American economy in the second half, overseas market demands from China may be more distinct to certain extent; 2. Pressure on local finance will lead to the situation that the investment in capital construction may be hard to keep increasing; 3. Real estate presents the signal of fall at present, so the investment in real estate may be tightened in the second half.
Comprehensively considering the above-mentioned factors, the transmission from price to profit will reach the supply side due to relatively slump demand side. Some effects of tax and fee reduction will work further, and steady monetary policy will offer certain supports continuously, but the pressure of economic downturn will increase, and GDP growth will be slower. Notwithstanding, there should be no problem to hold the baseline of 6% of GDP growth and achieve the economic growth goals.
The consumption growth rate this year will be stable within the range of 8.5% to 9%.
The Beijing News: Of the macro-economic data for the first half, which is the one you concern about more?
Liu Yuanchun: My top concern at present may still be the investment data. The data in June revealed a sign of rise, but I feel there are many uncertainties in fact. Many enterprises’ profit is going down as a whole, and the more important is, the Producer Price Index for Industrial Products (PPI) is at the level of zero growth, which leads to the situation that the investment expectation has not be uplifted fully. Whether the investment in the second half can be maintained to the level of 6% is the key for whether China can keep stable economic growth in the second half.
Another concern is that China is undertaking higher pressure from foreign trade.
The Beijing News: In the second half, the investment in the manufacturing industry reported a y-o-y growth of 3%, up in two consecutive months, but at a historically low level. How do you think about it?
Liu Yuanchun: Currently, China’s strategic positioning of the manufacturing industry has been more definite. In particular, a power like China must establish itself through the manufacturing sector and build it into a powerful manufacturing country. The goal remains unchanged completely. We will see that tax and fee reduction will be the most powerful good news for the manufacturing industry.
In the second half, the investment in the manufacturing industry will rise to certain extent. But it should be noted that the global trade pattern and economic environment are in a downturn period, any rapid rise of the investment will be impossible. I think, a progressive increase of the investment should be very satisfactory.
The Beijing News: The consumption data in June is better than the expectation. Will the momentum continue or not?
Liu Yuanchun: I feel that the consumption growth this year will be stable within the range from 8.5% to 9%, namely keeping stable at a relatively high growth level. The reasons are: 1. The Consumer Confidence Index (CCI) has returned to a new high level in recent two years; 2. The y-o-y growth rate of residents’ income is stable continuously, and higher than that of GDP. Many enterprises are in difficult conditions in operation, but they still pay salaries normally; 3. Works to develop and tap the potentialities of consumption of low-income groups and upgrade consumption of high-income groups are like a raging fire on the basis of Internet-plus.
The consumption growth in the second half will continuously maintain the current trend, but auto consumption may fluctuate. The government will surely take further aid policy to stabilize consumption.
The Beijing News: The market is paying high attention to policy orientation. What is you prejudgment?
Liu Yuanchuan: In an overall view, the positioning and orientation of the counter-cycle macro-economic policy will not change, and the combination of proactive fiscal policy plus steady monetary policy will remain unchanged. But the policies may be subject to some pre-adjustment and micro-adjustment in terms of intensity and focus. The intensify may be stronger and the focus may be transferred.
Specifically speaking, in the field of the fiscal policy, the channel for tax and fee reduction must be smooth and the policy must be able to be implemented at the micro level, which will be a very important focus of the fiscal policy. The second very important focus of the fiscal policy is how to expand the funds space of “financial sources” for local governments to alleviate their financial pressure, so as to make them able to further support construction of some large-sized projects and infrastructure.
Of course, the monetary policy will be subject to certain adjustment according to our economic growth rate. 1. Nominal GDP growth rate goes down at present. So whether will it be needed to moderately ease our monetary policy? This is the point that we have to pay attention to. Particularly, if the economic growth rate in Q3 goes downward to 6%, micro-adjustment of the monetary policy may be intensified. 2. The interest rate cuts by the Federal Reserve in July will lead the wave of interest rate cuts around the world. Given current global pattern, the interest rate cuts by the Federal Reserve may cause deterioration of the entire external environment, and thus force us to do something in the cuts to interest rate and required reserve ratios as part of our monetary policy.
Link to the original article: http://www.bjnews.com.cn/finance/2019/07/16/603795.html