Monday, Mar 27, 2017, 8:40 PM CST – China

Editorial

China is on the right track in restructuring its economy

Positive trends in economic development are taking place, with the government making more of an effort to restructure the economy to be more people-oriented and environmentally friendly.

On July 15, the National Bureau of Statistics released a set of statistics measuring how the Chinese economy fared during the first half of the year. The data show that China’s GDP expanded by 7.0 percent year-on-year during that time period, slightly exceeding the median market forecast for growth, which was 6.9 percent. As China is challenged by an economic slowdown, the GDP growth rate has become a major concern for the Chinese government, which has set its annual growth target at 7.0 percent.

Recently, the government has implemented policies aimed at restructuring China’s economy in order to make it less dependent on State-led investment, more efficient, and more innovation- and consumption-driven. The July data indicate that some of these policies have started to take effect.

Firstly, output in the service sector increased by 8.4 percent during this period, considerably higher than growth in the agricultural and industrial sectors, which increased by 3.5 percent and 6.1 percent respectively. The service sector now accounts for 49.5 percent of China’s economy, 2.1 percent more than it did over the same period last year.

Secondly, despite the economic slowdown, employment appears to be improving, with an official unemployment rate of 5.1 percent. 7.18 million more urban jobs were created in the first two quarters, a surprisingly high number, accounting for 71.8 percent of projected job creation for the entire year. The increase in urban employment may be a result of various government-led initiatives to encourage innovation and to boost the development of start-ups.

Thirdly, 60 percent of the economic growth in this period was driven by domestic consumption, an increase of 5.1 percent from last year. In comparison, the total volume of imports and exports decreased by 6.9 percent. The increase in domestic consumption is most likely driven by a better employment rate and a rise in disposable household income, which increased by 9.0 percent.

Positive trends in economic development are taking place, with the government making more of an effort to restructure the economy to be more people-oriented and environmentally friendly. The aim is to achieve what Chinese officials call a “better GDP.” In March of this year, the Chinese government adopted a new set of measurements with which it can evaluate the health of the economy. The government dropped “electronic power output” and “total cargo volume,” two statistics that have been used for decades, and adopted “research and development expenditures” and “energy intensity” as two major new factors in its evaluation system. According to the official data, energy intensity dropped by 5.9 percent in the first half of 2015.

There is no doubt that China is still under a huge amount of pressure to maintain its previous economic momentum and to prevent further slowdown, but these statistics show that the Chinese government is on the right track. 

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