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China: Restructure for Long-term Success
Source: news.cn
Source Date: Friday, July 26, 2013
Focus: Institution and HR Management
Country: China
Created: Jul 31, 2013

China's gross domestic product (GDP) growth slowed further in the second quarter of the year to 7.5 percent, triggering suspicions of a hard landing for the Chinese economy among China watchers and market participants.

 

According to Zuo Xiaolei, chief economist at China Galaxy Securities, China's GDP growth rate matches the country's current stage of development.

 

"With a 7.5 percent growth rate, China is now on the path of balanced growth," Zuo said. "The slowdown is just a shifting of China's economic growth model. Our Premier, Li Keqiang has made 7 percent growth the absolute minimum for the period of China's economic slowdown. The 7.5 percent growth we have seen in the second quarter is well above the bottom line, so there is no cause for concern over China's current economy data."

 

After three decades of double-digit growth, the world's second largest economy is now facing several latent structural problems, including overcapacity, real estate bubble, local government debt and those monopoly companies which are overly reliant on preferential policies.

 

"All of these problems have the potential to develop into major financial risks," Zuo said. "If left unsolved, either of them may lead to economic recession."

 

She continued: "Instead of myopic stimulus measures designed to accelerate GDP growth, our government has taken preventive measures to solve these deep-seated problems. Though it might be painful at first to quit the addiction to high-growth rates, present, we will benefit from the structural adjustment in the long run."

 

Zuo cautioned that despite these measures, some local governments still rely on investment as a driving force for the local economy and such noncompliance might jeopardize the central government's adjustment efforts.

 

"Both our President Xi Jinping and Premier Li Keqiang have repeatedly stressed that structural reform is more important than pure economic growth," she said. "However, some local officials still rely on investment as a driving force for the local economy. They are reluctant to adjust their development model. Though they talk a lot about the new concept of our central government, they are still acting in the same old way."

 

"Structural adjustment is an imperative for the governments of all levels," she stressed.

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