EditorialDecisions illustrate the importance to Beijing of maintaining a certain rate of growth

China’s economy may have expanded by 8.1 per cent last year, thanks to resilient overseas demand for its products, but that is not foremost in the minds of policymakers. Rather they are focused on a slowing rate of growth, marked by expansion of only 4 per cent in the last quarter, down from 4.9 per cent in the previous quarter. Evidence of that is to be found in decisions in two key policy areas that illustrate the importance to Beijing of maintaining a certain rate level of economic growth.

One cuts the one-year loan prime rate, the benchmark for corporate and household loans, for the second time in as many months, and the five-year loan prime rate, used as the benchmark for mortgage lending, for the first time in nearly two years. The rate cuts will help homebuyers and rekindle activity in a property market suffering from five years of clampdown. Debt-strapped developers will get a breathing space as they face nearly US$40 billion in offshore bond repayments in the first six months of this year.

The other decision will see the high-speed rail network – already the world’s longest – increased by 32 per cent to 50,000km by 2025.

On the one hand, the rate cut will make life easier for small to medium enterprises – key to sustaining healthy growth in the domestic economy and reducing reliance on exports – as well as throw a lifeline to developers. And on the other the continued big investment in infrastructure shows China still needs to rely on investment to help drive its economy as it transitions to more dependence on domestic growth.

To give some idea of scale, the increase in high-speed track of 12,000km alone exceeds the combined total in Spain, Japan, France, Germany and Finland. Given some people’s concerns about the risk of wasteful investment that creates “white elephants”, Chinese leaders would be right to subject all the new projects to rigorous scrutiny of socio-economic costs-benefit.