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China Headlines: Bright spots in China's slowing economy

Xinhua, September 29, 2015 Adjust font size:

China's economy is slowing, with downward pressure likely to persist for a while, which has spawned pessimism about the country's growth outlook.

But looking beyond headline growth numbers, positive changes have emerged and are expected to lay the foundation for sustainable long-term growth.

"China's economic fundamentals remain solid and will continue to maintain long-term steady growth," President Xi Jinping said during his U.S. visit.

The following are some highlights of the Chinese economy in 2015.

-- Improving industrial structure

The service industry accounted for 49.5 percent of GDP in the first half of 2015. In 2010, the share was 39.2 percent.

The bigger role the sector has played in shoring up growth has helped ease the country's reliance on resources and energy, and facilitated the economic transformation toward a more technology- and innovation-driven model.

During his U.S. visit, President Xi recognized the enormous market potential for the service industry, pledging to focus more on accelerating adjustments in the growth model and economic structure.

-- Consumption: fast and furious

Compared with investment and exports, consumption has been a less conspicuous growth driver for China in past decades, but it is catching up fast.

In the first half of 2015, it contributed more than 60 percent of economic growth, evidence of the success of China's restructuring.

In particular, new consumption models such as online shopping have accounted for nearly 10 percent of overall retail sales, and consumption in tourism and healthcare are expected to rise at a faster pace as society prospers.

-- Innovation, entrepreneurship

The Chinese government has emphasized reforms and innovation to steer the economy toward a more sustainable long-term path.

A wide range of measures for emerging businesses has been unveiled, including financial support, facility construction and administrative assistance.

There are increasing signs that innovation is being embraced as a source of competitive advantage and meaningful advances are emerging in fields ranging from mobile apps, consumer electronics and renewable energy.

A start-up boom has taken place. In the first half of 2015, newly registered enterprises had a total registered capital of 12 trillion yuan (1.9 trillion U.S. dollars), up 43 percent from a year earlier.

Government efforts to boost innovation will play a strong role in driving China's growth in the next two or three years, said Liu Yuanchun, an economist at Renmin University.

-- Warming property market

The housing market, a key pillar underpinning China's growth, took a downturn in 2014 due to weak demand and a surplus of unsold homes. The cooling has continued into 2015, with both sales and prices falling and investment slowing.

But as the central bank has cut benchmark interest rates four times since November and the government eased purchase restrictions, the housing market has gradually recovered.

Of the 70 large and medium-sized cities surveyed, 35 reported that new home prices climbed month on month in August, up from 31 cities in the previous month. A total of 26 cities reported month-on-month price declines, down from 29 in July.

-- Steady job market

Creating enough jobs and keeping the job market steady is one of the major priorities for the Chinese government.

China's registered unemployment rate in urban areas stood at 4.04 percent at the end of June, and 7.18 million new jobs were created in urban areas in the first half of the year, remaining largely stable despite economic headwinds.

-- Narrowing urban-rural gap

Growth of per capita net income of rural residents outpaced that for urban residents by 1.6 percentage points in the first half of the year.

-- Falling energy intensity

Despite the slowing economy, China has pushed harder for cleaner and greener growth. In the first half of the year, energy consumption per unit of GDP went down 5.9 percent.

The share of clean energy in total energy consumption reached 17.1 percent, up 1.6 percentage points from the same period last year.

-- Interest rate liberalization

After a series of reforms, China's decades-long endeavor to free up interest rates is finally reaching its last mile, giving the market a bigger say in allocating resources.

In May 2015, China began implementing the deposit insurance scheme, which is regarded as an important part of financial safety and a precondition for China to free up deposit rates.

On May 10, 2015, the central bank lifted the upper limit of the deposit rate's floating band to 1.5 times the benchmark from the previous 1.3 times, granting banks more pricing autonomy.

On June 2, 2015, the central bank allowed banks to issue certificates of deposit to both individual and institutional investors, less than two years after the issuance of certificates was rolled out among banks.

-- Exchange rate reform

The central bank in August adjusted the exchange rate formation system so it takes into consideration the closing rate of the inter-bank foreign exchange market on the previous day, as well as supply and demand in the market, and price movements of major currencies.

The move is expected to increase currency flexibility and support China's capital account liberalization

-- Wider opening-up

China is actively seeking a bigger say in international affairs by participating in and, increasingly, leading global cooperation initiatives.

The Asian Infrastructure Investment Bank and the Belt and Road initiative are among China's efforts to supplement the existing international order and overhaul global governance.

Meanwhile, China has promised to make a national "negative list" by 2018 of sectors that are not fully open to all market entities, both domestic and overseas.

"China will open its door still wider to the outside world, and the door will never be closed," President Xi said. Endi