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Full Steam Ahead
The Chinese economy's strong growth momentum in the first three quarters heralds a rosy picture for the whole of 2017 and the year to come
By Ma Xiaowen | NO. 44 NOVEMBER 2, 2017

Workers process artistic glassware products in the plant of the Hebei MSD Glass Technology Co. Ltd. in Hejian, Hebei Province on August 22 (XINHUA)

China's GDP grew at 6.9 percent year on year to 59.33 trillion yuan ($8.96 trillion) in the first three quarters of 2017, according to the National Bureau of Statistics (NBS).

In the third quarter, the GDP was up 6.8 percent year on year, making it the ninth consecutive quarter that has seen the GDP growth rate stay within the 6.7-6.9 percent range, NBS spokesperson Xing Zhihong said at a press conference on October 19. "This proves that the Chinese economy has maintained medium- to high-speed growth," Xing remarked.

The sound economic expansion in the first three quarters has laid a solid foundation for achieving the annual growth target, he said at the press conference, which released the figures for major economic indexes in the first three quarters. The government has set the growth target for the whole year at 6.5 percent. Meanwhile, energy consumption per unit of GDP dropped by 3.8 percent year on year in the first three quarters, higher than the yearly target of 3.4 percent.

Before the release, major international institutions and investment banks had raised their forecasts for China's growth this year in light of the strong growth momentum. In its latest East Asia Pacific Economic Update released on October 4, the World Bank upgraded China's 2017 and 2018 economic growth forecasts by 0.2 and 0.1 percentage points to 6.7 percent and 6.4 percent, respectively. The International Monetary Fund (IMF) also forecast China's economy to grow at 6.8 percent this year in its latest World Economic Outlook released on October 10, up by 0.2 percentage points from its April projection. The IMF's latest forecast for China's growth in 2018 is 6.5 percent, an upward revision of 0.3 percentage points.

Visitors watch the application of big data at the 13th China (Nanjing) International Software Product and Information Service Trade Fair held in Nanjing, Jiangsu Province from September 6 to 9 (XINHUA)

Benefiting people

According to NBS data, resident income in the first three quarters increased by 7.5 percent, 1.2 percentage points higher than the rate in the same period last year and also faster than the growth rates of GDP and per-capita GDP.

The employment market continued a good momentum. Steady economic growth, economic restructuring, and the implementation of mass entrepreneurship and innovation all contributed to a rosy employment report, Xing said.

In the first three quarters, China created 10.97 million new jobs in urban areas, 300,000 more than the number in the same period a year ago, NBS data show. "The full-year target of 11 million new jobs will be accomplished ahead of time," Xing said. The surveyed unemployment rate in 31 major cities in September was 4.83 percent, the lowest level since 2012, according to Xing.

Consumer prices also remained stable. Thanks to falling food prices, the consumer price index (CPI) picked up slightly by 1.5 percent year on year, 0.5 percentage points lower than the pace in the same period last year. Core CPI after deduction of food and energy prices registered a mild growth of 2.1 percent.

Better structure

The reasons for the economy's positive prospects, according to Bian Yongzu, a researcher with the Chongyang Institute for Financial Studies at the Renmin University of China, lie in a transforming economic structure and shifting driving forces.

Thanks to the full implementation of replacing business tax with value-added tax (VAT), the services industry has enjoyed fast growth. New economic forms such as the sharing economy, high-end industrial research and design and hi-tech services have also grown rapidly, becoming an important force in creating jobs and fueling economic growth, Bian said in an article in China Pictorial.

Since the services sector became the country's largest industry in 2012, it has maintained rapid growth and played an increasingly dominant role in the Chinese economy, Xing said. In the first three quarters, the services sector contributed 58.8 percent to GDP growth, 0.3 percentage points higher than in the same period last year.

The manufacturing sector is shifting toward the middle- and high-end spectrum, with more technological content. Value-added output of hi-tech manufacturing and equipment manufacturing accounted for more than 12 percent and 32 percent of the sector's total in the first three quarters, respectively.

Consumption continued to be the biggest contributor to economic growth, contributing 64.5 percent, 2.8 percentage points higher than the proportion in the same period in 2016. In sharp contrast, investment contributed 32.8 percent to GDP growth. Bian said expanding domestic consumption is creating more space for economic innovation.

In terms of regions, east China still leads the country in economic transformation and upgrading, and fostering new driving forces, while the central and western regions are accepting industry and technology transfers from the east. With late-development advantages, the central and western regions' major economic indicators are higher than the national ones, Xing said. The growth rates of industrial output in the central and western regions in the first three quarters were 1.2 percentage points and 0.2 percentage points higher respectively than the national average. Northeast China also experienced recovery. In the past three quarters, its overall industrial production rose by 1.6 percent, compared to a 3.1-percent decrease during the same period in 2016.

Two steamships anchor at the coal wharf at the Huanghua Port, Hebei Province on October 11 (XINHUA)

New driving forces

According to Xing, the shift in driving forces for economic growth has accelerated. In the first three quarters, strategic emerging industries registered a year-on-year growth of 11.3 percent, 4.6 percentage points higher than the growth of the whole industry. In the services sector, information services and business services grew by 29.4 percent and 11.4 percent, respectively.

New products also registered rapid growth in the first three quarters. The output of unmanned aerial vehicles for civilian use doubled; the output of industrial robots increased 69.4 percent; the output of new energy automobiles grew by 30.8 percent; and that of integrated circuit boards and solar batteries both saw growth of more than 20 percent.

New driving forces are gaining momentum, with new industries and new business models thriving, Xing said. In the first three quarters, online retail sales of physical goods picked up 29.1 percent and accounted for 14 percent of total retailing of consumer goods, 2.3 percentages points higher than in the same period last year. The digital economy and the sharing economy are penetrating into traditional industries, and new services are also emerging, he added.

Upbeat outlook

A report released by China Minsheng Bank's research arm said the 19th National Congress of the Communist Party of China has pointed out the future direction of building a modernized economic system, which will push forward various reforms and keep releasing reform dividends.

It predicted that the GDP growth this year could be 6.8 percent because stable performance of the economy in the first three quarters has laid a solid foundation for the fourth quarter.

The report said that the financial sector, which has seen the leverage rate and bad loan ratio drop as a result of strict supervision implemented since the end of 2016, can better serve the real economy. Xing also said, "While carrying out macro-control in the financial sector, the government is paying special attention to maintain a neutral and prudent monetary policy and keep the liquidity at a reasonable level to prop up the real economy."

The China Minsheng Bank report pointed out that fiscal expenditure during the first three quarters grew much faster than in the past, indicating a better implementation of the proactive fiscal policy. Data from the Ministry of Finance show that fiscal expenditure rose 11.4 percent to 15.19 trillion yuan ($2.29 trillion) in the first three quarters. Both the central and local governments implemented the budget expenditure faster than in the same period last year, with their respective growth rates in the first three quarters reaching 8.3 percent and 11.9 percent, 0.2 percentage points and 3.2 percentage points higher than in the same period last year..

Meanwhile, the government has been reducing tax and fees for enterprises. The fiscal policy will prop up economic growth in the fourth quarter, the report added.

It also said there are downward risks in the fourth quarter. The policies to cool down the real estate market have taken effect, as indicated in the 12.2-percent drop in commercial housing for sale at the end of September. Environment protection patrols will restrict production in the manufacturing sector to some extent. High growth in infrastructure investment can't be sustained.

The report predicted that the fourth quarter may see the GDP growth drop by 0.1 percentage point to 6.7 percent and the whole year will achieve a 6.8-percent growth rate, 0.1 percentage point higher than that in 2016, indicating economic growth has entered the horizontal section in the L-shaped trajectory. This will lay a solid foundation for realizing the goal of doubling the 2010 GDP by 2020.

Copyedited by Sudeshna Sarkar

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