Experts attribute China's steady economic growth to effective policies

BEIJING - China's economy is operating within a reasonable growth range due to effective policies implemented by the Chinese government, say experts.

Steady economic growth

The macro economy is judged by four indicators - economic growth rate, employment, home prices and international balance of payment, said Yao Jingyuan, researcher at the Counselor's Office of the Chinese State Council, adding that China's economy maintains moderate but stable and sound growth.

China' economy continued its steady expansion in the first half of this year with GDP up 6.9 percent year on year to about 38.2 trillion yuan ($5.6 trillion), data from the National Bureau of Statistics showed Monday.

Employment-wise, some 7.35 million new jobs were created in China's urban areas from January to June, accounting for nearly 70 percent of this year's goal of creating 11 million jobs.

On the prices front, China's consumer price index, a main gauge of inflation, increased 1.4 percent on average in the first half of the year, said Yao, adding that neither inflation nor deflation is possible at present.

As for international balance of payment, China's foreign exchange reserves reached over $3 trillion by the end of June, with balanced capital outflow and inflow.

Effective government policies

"In my opinion the policy of the Chinese government has proven to be effective, a result from the base laid down two or three years ago," said Alexei Maslov, head of the Oriental Studies Department of the Russian Higher School of Economics Research University.

Maslov attributed China's steady economic growth firstly to gradual restructuring of the economy at the local level.

Secondly, the anti-corruption campaign also plays a key role. "It is estimated that even a partial victory over corruption may account for about 0.5 percent of GDP growth," Maslov said.

Maslov said the third reason is that China has begun to pay much more attention to the possible return of its investments abroad since 2017. In 2015 and 2016, there was a huge number of foreign investments, which were risky and did not achieve expected returns.

Maslov said other factors include a successful regulation of agriculture purchase prices and the closure of "zombie companies", i.e. inefficient enterprises which are basically bankrupt or are only kept alive by bank loans.

"It's much better to let the zombie firms die because in the end the government is gonna have to cover all that debt basically," said David Dollar, senior fellow at the Brookings Institution in Washington.

Finally, according to Maslov, foreign trade, which stagnated for a long time, is gradually recovering globally now.

"China's GDP growth in the past half year is another sign of recovery in the global economy and China's centrality to it, with strong trade performance helping to hold growth up," said Peter Drysdale, head of the East Asian Bureau of Economic Research and East Asia Forum at the Australian National University.

China's foreign trade has shown very good dynamics, an increase of almost 20 percent in the last six months, Maslov said.

The growth is the result of a number of factors, including China's adoption of new logistical flows, signing full or partial free trade agreements with a number of countries and the rapid development of e-commerce.

To deepen reform

China should "create a stable, fair, transparent and predictable business environment, and speed up efforts to build an open economy in a bid to promote the sustainable and healthy development of the Chinese economy," Chinese President Xi Jinping said at a meeting of the Central Leading Group on Finance and Economic Affairs on Monday.

"I think it's a good time for China to move ahead with economic reform because the economy is doing quite well and it's easier to reform in the good times than in the down cycle," said Dollar.

Drysdale said the Belt and Road Initiative and the anti-corruption campaign have illustrated the Chinese leadership's determination to push forward with reform, despite difficulties.

The challenge is to deliver the benefits of reform without pumping up the economy. That means continuing to prioritize reform over growth, said Drysdale.