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China doubles down on reform and consumption as future drivers in the wake of declining growth
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UPDATED: April 21, 2014 NO. 17 APRIL 24, 2014
Restructuring a Priority

The decline of China's economic growth in the first quarter of this year has cast shadows over the market. People are worried that China's slowdown of economic growth might affect that of the world at large. Some economists have even suggested China issue certain stimulus policies, like the government's 4-trillion-yuan investment in 2008.

Now is a crucial moment for the adjustment of China's economy. Before any large-scale impacts are further imposed on the Chinese economy, it's more important to adjust our economic structure and ensure sustainable economic growth than to issue new stimulus packages.

The worry about the slowdown is understandable, but it should not affect the market's sentiments. The slowdown in the first quarter is not necessarily evidence that the Chinese economy is encountering problems, but instead, may indicate that the quality of China's economic growth is higher than before.

The proportion of the added value of the service sector to overall economic growth surpassed the secondary industry for the first time in 2013, and this momentum has continued in the first quarter this year. This is also the target of China's economic restructuring. In addition, the gross production of the middle and western regions to the country's GDP continued to rise, which implies a more coordinated economic growth across the country. Major indicators of physical outputs like the growth of society's electric power consumption and freight volume match the current pace of economic growth. All of these prove that the economic structure adjustment has already seen results.

Statistics show that the registered unemployment rate in cities and towns in 2013 was kept at a relatively low level of around 4.1 percent. Small and micro-businesses are the most active job providers. Small and medium-sized businesses of fewer than 500 employees show the biggest demand for new employees, higher than the national level. Particularly, the demand for employment in small and micro enterprises of fewer than 20 employees has grown by 35 percent over the same period last year.

The current economic growth slowdown has resulted from the government's active economic structuring, and does not mean that any problems exist in the Chinese economy. Apart from giving priority to the development of new industries like information technology, new materials, etc., the country's economic restructuring also covers the reducing of social investments and credit scale and eliminating outdated industrial capacity.

At the beginning of 2014, the Central Government anticipated the slowing pace of economic growth and set this year's economic growth target at around 7.5 percent. The government will not adopt short-term strong stimulus measures due to temporary economic fluctuations, but is instead trying to prevent economic growth from excessive credit expansion and overdependence on investments, as well as surplus production capacity.

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