Economy Slows to Improve Endurance, Quality

China's economic growth is poised to slow this year, with several leading economic indicators, including the PMI, dipping in the first half.

However, economists say the lower growth rates, despite making some investors jittery, are a welcome sign that Beijing's leaders are more focused on the quality and endurance of the economy than the previous heady growth targets.

They say China's growth, albeit slower, is still very robust compared to the world's other economies.

In an update of its World Economic Outlook issued in April, the International Monetary Fund projected the world economy would grow at 3.1 percent this year.

It forecast China's growth at 7.8 percent, much higher than the 5 percent forecast for emerging markets and developing economies as a whole, and the 2 percent growth for Japan, the United States and Europe.

British economist Jim O'Neill, best known for coining the "BRICs" acronym, pointed out that China's economy was now more than half the size of the United States, which meant "if China grows by 7.5 percent ... this would be equivalent of the US growing by 4 percent."

China's growth rate and its wealth-creating potential still stands out against other major economies in the world, and it will remain a key engine for world economic recovery from a middle and long term perspective.

According to O'Neill's estimate, if China grows by 7.5 percent annually in the next decade, it would be an economy of around US$16 trillion or more by 2020, allowing its GDP per capita to reach US$12,000-13,000.

China's current economic cooling stems from policy adjustments the government has rolled out, with an aim to deepen reform and lay foundations for future solid growth.

As the Financial Times reported, China's slower growth is for real, and most of it has occurred as a result of government policies aimed at shifting the focus to better quality growth and not just growth for the sake of it.

Better quality growth calls for high quality decision making.

Striving to hit the right pitch of development, the government is unveiling a string of reform initiatives that are much more detailed, specific and well-targeted than before to stimulate domestic demand, improve economic efficiency and people's livelihoods and promote urbanization.

The Associated Press said in a recent report that China's government had ordered more than 1,400 companies to cut excess capacity, despite the slowing economic growth rate. The affected industries include steel, cement, copper and glass.

It said the recent move affirmed Beijing's determination to push ahead with a painful economic restructuring.

The Financial Times said the Chinese government had unveiled a package of measures, dubbed a "mini-stimulus" by economists, to boost growth by eliminating taxes on small businesses, reducing costs for exporters and lining up funds for the construction of railways.

The measures aim to reduce the power of the government and give companies more space to operate, it said.

And positive changes have already occurred in some areas of the economy, thanks to the stimulus package.

The added-value of the country's tertiary industry increased 8.3 percent year on year in the first half of this year.

The employment sub-index in HSBC Services' PMI remained at a relatively high level of 52.6 in June.

Meanwhile, the country's retail sales increased 12.7 percent year on year in the first half, according to the latest data released by the National Bureau of Statistics.

Against such a backdrop, some global investment agencies are beginning to rethink China's economic slowdown to avoid overreaction and adjust their investment strategies to the new pace of China's economic growth.