In the wake of the financial crisis, any signs of a slowdown will trigger fears. China, although its economy has resumed double-digit growth, is no exception. China's first-half economic figures released in mid-July show its GDP grew 10.3 percent year on year in the second quarter, a considerable deceleration compared with the 11.9 percent in the first quarter. This has upset many investors who are pinning hopes on China's robust growth, as the EU debt crisis lingers and the U.S. unemployment rate remains high.
But this slowdown is no reason to panic. A slower pace of economic growth is natural and needed when the country is seeking economic restructuring and sustainable growth. In fact, the year-on-year GDP growth in the second quarter slackened as expected. Statistically, this growth rate is calculated on a yearly basis. The country's economy began rebounding since the second quarter of last year, providing a relatively higher base. Meanwhile, tough measures to curb the surging house prices adopted in April weakened housing-related economic activities.
The slowdown is also partly resulted from the government's energy-saving and emissions-reduction efforts. Its measures to control excessive growth of high energy-consuming industries, including limiting the number of new projects, eliminating outdated capacities and removing export tax rebates, put a brake on the growth speed of the industrial sector, with industrial output growth falling sharply from 16.5 percent in May to 13.7 percent in June.
The reduced pace is considered timely and helpful in cooling the economy. Many economists believe the strong performance in the first quarter was close to overheating. If the economy kept expanding at the same rate, runaway inflation would become inevitable.
The slowing tendency may continue in the second half of this year and next due to external uncertainties and the ending of the two-year 4-trillion-yuan ($586-billion) stimulus package that began in 2009.
More importantly, economic restructuring efforts will gradually take their toll on the growth speed. Traditional labor-intensive, resource-consuming industries, which have propped up high-speed growth, are suffering from rising labor and other production costs. But that's the transition China's economy should undergo to achieve sustainable growth. n