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POLITICAL ECONOMY
China 2Q economic growth slowed to 7.5%: AFP survey
by Staff Writers
Beijing (AFP) July 12, 2013


China finance minister sees 7 percent 2013 growth
Washington (AFP) July 12, 2013 - China's finance minister has said he expects the nation's economy to grow seven percent this year, raising questions about whether it can achieve the official 7.5 percent target set four months ago.

"Our expected GDP growth rate this year is seven percent," Lou Jiwei told reporters on the sidelines of an annual strategic and economic dialogue between China and the United States in Washington on Thursday.

"Of course, it won't be a big problem for us if we achieve growth of seven percent or 6.5 percent."

His comments come as growth in the Asian powerhouse -- the second-largest economy in the world -- shows signs of slowing down and could indicate its leaders are prepared to tolerate much weaker expansion.

China's official 7.5 percent growth target was announced at a Communist Party parliamentary meeting in March. The goal is normally declared conservatively, so that it is regularly exceeded in practice.

But Lou's remarks come as worries mount over China's growth prospects following a slew of weak data on manufacturing and exports.

China is due to announce gross domestic (GDP) product figures for the second quarter on Monday. The median forecast in a survey of 10 economists by AFP was for GDP growth of 7.5 percent.

"As for the first half of this year, the figures will be released in a few days and we think it will be slightly lower than 7.7 percent but not far from it," said Lou.

He was speaking after Premier Li Keqiang indicated the government might take steps to support the economy as he was reported to have emphasised the importance of stabilising growth and preventing it slipping below the "lower limit".

China's economy grew 7.8 percent in 2012, racking up its worst performance in 13 years. Despite optimism that this year would be better, first-quarter growth slowed to 7.7 percent.

Leaders have stated they want to wean the country off reliance on exports and investments as growth drivers for the economy and make domestic demand the primary engine in a bid to help consumers enjoy the fruits of the country's decades of strong expansion.

China's economic growth fell dropped to 7.5 percent in the second quarter of this year, analysts predicted in an AFP survey ahead of fresh data Monday, projecting a further slowdown in the world's second-largest economy.

The median figure from a poll of 10 economists is a further deceleration from the already slower 7.7 percent recorded in the first three months, as concerns mount over the Asian powerhouse.

"One point for sure is that the second-quarter growth will definitely be lower than the first," said Yao Wei, economist at Societe Generale in Hong Kong, citing weakness in manufacturing as a result of poor domestic and foreign demand.

"Generally if manufacturing growth declines, macro-economic growth will slow down as well," she said.

China has also been buffeted recently by worries over its financial system, which suffered instability last month when the interest rates banks charge each other surged to record highs, reflecting Beijing's reluctance to loosen monetary policy.

The country's new leaders so far seem to have taken a more laissez-faire approach to the slowing economy, a development that in years past would have been met with monetary easing and large-scale pump-priming.

They have proclaimed a long-term goal of rebalancing the economy, and since coming to power as Communist Party chief in November and then state president in March, Xi Jinping has placed less emphasis on the traditional growth drivers of exports and investment, and more on consumer spending.

"The new policymakers have focused more on reforms rather than short-term stimulus since taking office, so in the short run the downward risk is increasing," said Ma Xiaoping, a Beijing-based economist at British bank HSBC.

"Reform measures are beneficial in the medium-to-long term, but they may not provide some stimulus in the short term," she said.

Late last month, Xi was quoted prominently in state media as saying officials can no longer expect kudos just for achieving growth targets.

"We should never judge a cadre simply by the growth of gross domestic product," Xi told a party meeting, the official Xinhua news agency reported.

Premier Li Keqiang, whose brief is the economy, emphasised Tuesday in comments posted on the government's website the importance of pursuing reforms -- but also spoke of the importance of stabilising growth.

The remarks prompted a stock market rise on Thursday on hopes they could signal the introduction of some stimulus measures.

The government has set a growth target for 2013 of 7.5 percent, the same as last year's. Such objectives are usually made conservatively and thus usually exceeded.

Comments by Chinese Finance Minister Lou Jiwei, however, raised questions about whether that figure can be achieved this time.

"Our expected GDP growth rate this year is seven percent," Lou told reporters on the sidelines of an annual strategic and economic dialogue between China and the United States in Washington on Thursday.

"Of course, it won't be a big problem for us if we achieve growth of seven percent or 6.5 percent."

China's economy grew 7.7 percent in the first quarter, a result that disappointed economists who had expected a more vigorous 2013 after last year's 7.8 percent performance, the worst annual result in 13 years.

Nomura International economist Zhang Zhiwei said Li's comments "may indicate that he is feeling under more pressure as the economic data continue to weaken".

"Next week will be a testing time for the government in revealing just how much of a growth slowdown it is willing to tolerate," Nomura economists said earlier.

The securities firm said last month it sees a "30 percent probability" China's economic growth will fall below 7.0 percent in the second half of the year.

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