HONG KONG — China’s new tough-love approach to overhauling its giant economy showed through in weak economic data released on Monday, underlining just how rapidly growth in the once-sizzling economy has cooled.
China’s economy grew 7.5 percent in the second quarter of this year, compared with the same period a year earlier, the national statistics office reported. That was in line with economists’ expectations, and extended a progressive slowdown from 7.7 percent gross domestic product growth in the first quarter and 7.9 percent in the final three months of 2012.
Industrial output data for June, also released Monday, came in weaker than forecast, with an increase of 8.9 percent from a year earlier — down from 9.2 percent in May.
Retail sales, however, were better than expected, rising 13.3 percent in June from a year ago. May’s reading was 12.9 percent.
Sheng Laiyun, the spokesman for China’s National Bureau of Statistics, told reporters in Beijing that the data were within the bounds of official expectations, but he acknowledged headwinds affecting the economy.
“Viewed overall, national economic performance in the first half of the year was generally stable,” Mr. Sheng said during a news conference broadcast live on Chinese television Monday morning, “and the main indicators remain within the reasonable bounds for the annual forecast. But economic conditions are still complex and changeable.”
Senior Chinese officials last week set the tone for a more measured approach to economic expansion by declaring confidence in government growth targets, yet stressing the need for changes to ensure that growth.
On Friday, a meeting of the State Council Standing Committee — or China’s cabinet — that was chaired by Prime Minister Li Keqiang said that “innovation and expansive thinking are needed to expand domestic demand.”
“There needs to be both effective and stable growth and also structural adjustment, ensuring that there is action while maintaining stability,” read an official summary of the meeting, according to state-run media.
In an apparent effort to dispel jitters about the economy, China’s state-run media have also featured commentaries saying that the government’s economic policies remain on track, including the target of 7.5 percent G.D.P. growth for the whole year.
To a large degree, China’s recent slowdown has been engineered by authorities in Beijing, who are trying to steer the Chinese economy from an increasingly outdated growth model toward expansion that is more productive and sustainable, if slower.
While this slowdown has been happening for more than two years, a flood of comments from policy makers in recent months has made it increasingly clear that the new leadership that took the helm in March is serious about tolerating significantly slower growth in return for longer-term gains.
For years, China has relied on cheap credit, heavy manufacturing, infrastructure investment and exports as economic drivers — a combination that produced double-digit annual growth rates for much of the past 30 years.
Increasingly, however, this growth model is running out of momentum. China’s population is aging and its labor force is shrinking, meaning that labor productivity has to be raised to make up for the shortfall. Rising wages and a stronger renminbi have eroded China’s competitiveness and are undermining its status as the blue-collar factory floor of the world. At the same time, demand in key export markets remains slack.
Aware of these pressures, the new leadership in Beijing has said it wants to shift the economy more toward domestic consumption, reduce inefficiencies and environmental degradation that came with headlong growth and permit more competition and market liberalization in formerly state-controlled areas.
Recent pronouncements from policy makers and a days-long cash crunch in the banking system last month have created an impression that Beijing is prepared to tolerate some pain.
“The fact that we have not seen moves toward more stimulus seems to show that they are comfortable with seven-ish growth rather than nine or 10,” said Paul Gruenwald, chief economist for Asia-Pacific at Standard Poor’s, at a media briefing last week. “It suggests that the authorities understand that there is a trade-off between growth and financial stability.”
Article source: http://www.nytimes.com/2013/07/16/business/global/chinas-gdp-growth-slows-to-7-5.html?partner=rss&emc=rss