Vow to put growth on even keel
Beijing's top leaders pledged to continue to make stabilising growth a priority in the second half, leaving room for more policy easing as needed to stem a further downturn.
A meeting chaired by President Hu Jintao reiterated the need to put stabilising growth in a more important position, underscoring fears that weak domestic and global demand may further damp the economy. That could threaten social stability amid the Communist Party's once-in-a-decade leadership reshuffle.
'China's economic development is still facing a grim global environment, and there are still many negative factors affecting the steady operations of the economy,' a statement on the government's website and reported by Xinhua said, citing discussions at the meeting held yesterday by the Politburo, China's top decision-maker on key economic and political policies.
'Clearly, Beijing policymakers are well aware of downside risks to the country's outlook, and remain willing to step up policy easing in support of growth and employment,' HSBC economists Sun Junwei and Qu Hongbin said in a research note.
Today, China will publish its official purchasing managers' index, which measures manufacturing momentum. HSBC China Flash PMI, a preliminary indicator based on a separate survey, showed earlier this month that slower growth may have continued into the third quarter, given the index stayed below 50 for the ninth straight month, indicating a contraction. But the gauge edged up to 49.5 in July from 48.2 in June.
Expansion in the world's second-largest economy slowed to 7.6 per cent in the second quarter, the weakest quarterly performance in three years, from 8.1 per cent in the first, damped by the European debt crisis and cooling investment at home.
Yesterday's statement didn't outline any concrete new measures. But the government said it aimed to maintain stability in consumer prices, continue with an active fiscal policy and a prudent monetary policy, step up structural tax cuts, and maintain 'steady and appropriate' growth in money and credit supply.
While the focus was on growth, the government made clear that controls to rein in the property market won't be relaxed. It vowed to 'firmly curb demand for speculation and investment and take actual steps to prevent a rebound in property prices', saying it would add supply of ordinary, particularly small, housing.
The statement also said the government would 'stabilise and expand employment'.
Zhang Zhiwei of Nomura International (HK) said the latest meeting left the policy stance 'rather flexible' and the magnitude of easing was yet to be seen - but the July new loans figure would be the best gauge.
Separately, President Hu also chaired a meeting of leaders from non-Communist Party organisations on July 26, where he said the government should focus on expanding domestic demand, boosting grain production and supporting small firms and services, another Xinhua report said yesterday. Hu said Beijing would 'steadily push forward the reforms' on resources prices, medical and health, as well as the fiscal and financial sectors. But he didn't give details.
Premier Wen Jiabao stressed at the meeting that the 'downside risks to the economy remain large'.
Aaron Gurwitz, chief investment officer of Barclays, said in Hong Kong he expected Beijing to roll out more stimulus policies in coming months and the annual economic growth to exceed the official 7.5 per cent target, though the measures aren't likely to match the scale of those in 2008.
Mainland economic growth in the second quarter, the weakest since 2009. Beijing's target for the whole year is 7.5 per cent