Urbanization, services sector to get more support

China is not likely to make major policy changes because of fluctuations in specific economic indicators, Finance Minister Lou Jiwei remarked over the weekend, despite the country witnessing downward pressure on economic growth.

Instead, China's macroeconomic policy is designed with a comprehensive target in view, especially employment and inflation rate, Lou said during the G20 Finance Ministers and Central Bank Governors meeting held in Cairns, Australia, over the weekend, according to a statement from the People's Bank of China, the central bank, on Sunday.

In terms of fiscal policies, the Chinese government has rolled out measures to cut taxes for small and micro companies, encourage non-State capital in major projects like infrastructure and further deepen the fiscal reform, Lou noted.

In the latest move to spur the economy, the central government announced on Wednesday that it would exempt value-added tax and business tax for small firms with monthly sales revenue no more than 30,000 yuan ($4885.83). The previous threshold was 20,000 yuan.

Also during the G20 meeting, central bank governor Zhou Xiaochuan said that more financial support will be given to urbanization projects and the growing services sector.

Xu Hongcai, director of the Department of Information under the China Center for International Economic Exchanges, noted that the measures will help to improve the "quality" of China's economic growth and serve the goal of economic restructuring.

Introduction of non-State investment into major infrastructure projects could help to stabilize the economy, but the lack of funding has been one of the main problems hindering the country's infrastructure construction, experts remarked.

"Measures should be taken to guarantee the profits of private investors to keep them motivated," Xu said.

"These measures will generally benefit China's economic growth, but I think they are still not enough to offset the short-term downward pressure," Chang Jian, chief China economist at Barclays Capital, told the Global Times on Sunday.

China reported slower growth in some key economic indicators in August, such as industrial added value and fixed-assets investment. Power consumption, a major gauge of economic activity, dropped 1.5 percent year-on-year in the month.

But Lou stressed that despite the downward pressure, China's economic growth is still "within a reasonable range."

Weakness in a number of economic indicators for August has raised expectations that China will loosen its monetary tools in the next few months.

"We maintained our view that interest rate cuts are inevitable, but pushed our forecast [of the rate cuts] by one quarter to the fourth quarter or the first quarter in 2015," Chang wrote in a research note e-mailed to the Global Times on Thursday.

Chang expects China's GDP growth to be around 7.2 percent this year and 6.9 percent in 2015, noting that the government appears to be more tolerant to slower growth now.

Xu agrees that China's economy may miss its target of 7.5 percent growth this year - to stand at around 7.4 percent this year, but believes the central bank will not announce benchmark interest rate cuts in a short term, as it still has room to use tools like open market operations to increase liquidity.

The G20 Finance Ministers and Central Bank Governors meeting has emphasized the importance of infrastructure investment in boosting demand and economic growth, according to the central bank statement.

"The global economic recovery still doesn't have a solid foundation. Both developed and developing economies need to focus on infrastructure construction for sustainable growth," Xu said.