Policies stay stable despite slowdown

By Liang Fei

China will maintain stable policies in the next half of this year to avoid fluctuations in the economy, said the People's Daily, the official mouthpiece of the Chinese Communist Party, in a front page editorial Monday.

In the first half of the year, China's GDP grew at 11.1 percent year-on-year. However, in the second quarter, due to a series of tightening policies, the economy began to gradually slow down.

"If there is no further stimulus for the economy, it is quite possible that growth will fall to 8 percent at the end of the year," said Ba Shusong, deputy director general of the Institute of Financial Studies, Development Research Center of the State Council.

With the slowing economy, many analysts are saying that the Chinese development model has lost its momentum.

Wang Xiaoguang, a researcher with the Chinese Academy of Governance, does not agree. "A growth rate around 8 percent is already good enough. The double-digit growth last year is a result of stimulus packages released during the financial crisis, which is not usual. Now that the crisis is almost over, growth rate of the economy should come back to normal." Wang said. "I'm perfectly confident in China's economy."

One important concern with the economy is how to balance growth and cool down the overheating real estate sector. Wang told the Global Times that the slowing real estate sector is not a bad thing for the economy.

"The real estate bubble is the major reason for China's quick rebound from the financial crisis. Now it is time for the economy to reduce its over reliance on the real estate sector," said Wang.

The editorial also expressed concerns with the possibilities of inflation, due to the fact that prices for major agricultural products have seen a huge increase recently. Ba said that the consumer price index (CPI) would hit 4 percent in the third quarter.

However, Wang said it is not likely for China to experience inflation in the near future. "I predict that the CPI in September will be less than 3 percent. Inflation will not be a problem for the economy," said Wang.

Source: Global Times