China Focus: Chinese economy learning to avoid rocky start

China's economic activity normally starts soft at the beginning of a new year and pessimists predict 2015 to be no exception, with some expecting an even slower start this year.

But an official resolution to transform the economy and continue pro-growth measures may help ease the economy into the new year.

The State Council, China's cabinet, announced it will strengthen efforts to promote mass entrepreneurship and innovation nationwide to promote creativity-driven economic growth.

This is the latest move from policy makers to seek new impetus amid the economic "new normal" of slower but higher quality growth.

China will work to unleash new growth vitality for its economy from entrepreneurship, innovation and creativity, while speeding up the formation of new engines for maintaining a medium-high level of growth rate, Vice Premier Zhang Gaoli said earlier in the year.

"China has a working population of more than 900 million and boasts over 70 million enterprises and individual businesses, which contain enormous creativity," said Lian Weiliang, deputy head of the National Development and Reform Commission, the country's top economic planner.

The new determination to push innovation may not provide a quick fix for the growth rate but will definitely prove a boon in the long run, analysts said.

IMPROVING OUTLOOK

Despite looming downward pressure, China's economic outlook has gradually brightened thanks to progressing reform and pro-growth measures.

"Growth across Asia still looks comfortable enough by world standards. China, growing at over 7 percent last year, is not collapsing as many had feared," the latest HSBC research note said Tuesday.

Zhang Liqun, a researcher with the State Council's development research center, was optimistic about China's performance this year, saying the world's second largest economy will likely emerge the downturn after gaining more strength to fend off risk.

There is hope that the economy will level out this year, helped by better domestic consumption, foreign trade and recovery in property and infrastructure investment, he said.

J.P. Morgan China chief economist Zhu Haibin said the improvement in trade surplus due to falling commodity prices will become favorable to economic growth and cheaper crude prices will gradually stimulate consumption.

China's foreign trade rebounded to 48.9 percent year on year in February following surprise contraction in previous month, an encouraging sign for the slowing economy.

In addition, China's chilled property sector will have a smaller impact on the overall economic growth with preferential policies continuing to prop up the sector, Zhu added.

Zhang forecasts economic growth this year will stabilize at slightly above 7 percent thanks to improving conditions.

HSBC maintained its forecast on China's economic growth in 2015 at 7.3 percent on a year-on-year basis and projected 7.1 percent for the first quarter, higher than the growth goal set by the authority.

The central government lowered its growth target to 7 percent for 2015, below the 7.5-percent goal that was narrowly missed last year.

Justin Yifu Lin, honorary president of the National School of Development at Peking University, regards the target as completely achievable, saying the economic growth this year will likely beat the target.

China still has the potential to maintain around 8-percent growth for another decade or even longer, Lin added.

Premier Li Keqiang said earlier this month that policymakers had enough room and tools to shore up economic growth if it faltered.

Nevertheless, the downward pressure exists as global recovery keeps weakening and domestic reform has yet to finish.

China's manufacturing activity in March fell to an 11-month low of 49.2, indicating weaker growth momentum, according to HSBC's preliminary purchasing managers' index (PMI) on Tuesday.

HSBC's chief China economist, Qu Hongbin, therefore argues that a lot more easing, primarily monetary but also fiscal, will have to be unleashed to steady demand.

Although the government lowered this year's growth target to 7 percent, achieving this target will require further policy support which the government stands ready to provide, as implied by a clear easing bias in the government work report, UBS economist Wang Tao said. Endi