Bounce in China’s economy may be short-term rebound, not long-term reversal: top think tank

Researchers at a top government think tank have urged Beijing not to relax its focus on stabilising the economy, saying recent better-than-expected data might reflect only a short-term rebound, rather than a long-term reversal of slowing growth.

Xu Hongcai, a research division chief with the China Centre for International Economic Exchanges, said an expected imminent cut in the central bank’s reserve requirement would help stabilise the economy, but he saw little room to cut benchmark interest rates this year.

Meanwhile, a survey by the Ministry of Commerce found nearly 60 per cent of 3,000 trade enterprises saw the outlook for exports as more severe this year and “dared not be optimistic”.

China’s GDP rose 6.7 per cent in the first quarter from the previous year, a level within the government target for this year, and officials say key indicators are better than expected.

Rebound on the horizon as China’s economy ‘to stabilise in second quarter’, says think tank

Economists are concerned over the sustainability of recent growth. They say it has been driven by the old-fashioned way – through property investment and infrastructure construction – and that the increase of credit will add to an already heavy corporate debt load.

Xu said increasing the money supply and investing to stimulate growth could work in the short term but would have “big negative consequences”.