A controlled slowdown and signs of rebalancing

Although China’s economy growth slowed down, it is the consequence of government active control and there began to show signs of balanced development.

China’s rebalancing effort, shifting from reliance on net exports and capital formation to domestic consumer demand, is proceeding.

The problems of slowing growth in China should not be overemphasized as the country is undergoing a structural shift from resources-and investment-driven growth to a more balanced and more sustainable pattern, analysts said.

Potentially, China can still stimulate its economic growth much faster than 8.1 percent with enough firepower within its policy ammunition, they added.

China has the confidence, conditions and capabilities to achieve this year’s development goals, Premier Wen Jiabao said Sunday at a trilateral business summit between China, Japan and the Republic of Korea.

Wen noted that the Chinese economy is currently enjoying sound development momentum, and people’s living standards and market confidence are continuing to improve.

China will accelerate the transition of the country’s development mode, adjust the economic structure, strive to expand domestic demand, promote energy conservation and emissions reduction, develop the green economy and realize sustainable development, the premier said.

Wang Xiaoguang, a researcher from the Chinese Academy of Governance, an advisory body to the central government, said though the economic growth is declining, it offers a great opportunity for the country to adjust its economic growth pattern to ensure more sustainable development in the future.

The slowdown in housing construction, in response to the government’s efforts to control the real estate bubble in major cities, appears to have bottomed out as property prices stopped falling during the first quarter of 2012 and even showed a small uptick in several big cities after about nine months of decline. Construction of government-sponsored “affordable housing,” meanwhile, has picked up in some areas.

Many low-tech, low-margin manufacturing enterprises are closing or relocating to lower-cost areas. Over time, these structural changes will promote higher household consumption growth.

An apparent acceleration in financial sector reform will further promote structural economic change in the right direction.

In the medium term, growth may come down further. But it is clear that a structural transformation of China’s economy is already well under way thanks to slower export growth and rising domestic production costs.