Yearender-Economic Watch: A review of China's economic year

BEIJING, Dec. 19 (Xinhua) -- If China were a giant corporation, it would have impressed the public with its stellar annual results for 2017.

While maintaining stable growth, it improved asset quality, reduced liability risks, and brought in new growth drivers for long-term and sustainable growth.

As policymakers discuss the economic agenda for 2018 at the annual Central Economic Work Conference that opened Monday, a review of China's achievements in 2017 will give a glimpse of where the country's economy could be heading.

STABLE GROWTH

China's GDP expanded 6.9 percent year-on-year in the first three quarters, above the government target of around 6.5 percent for the year.

The IMF has revised up its forecast for the fourth time this year, to 6.8 percent for 2017 and 6.5 percent for 2018.

"Under the pressure of structural reform, China has managed to maintain medium-high growth with few fluctuations. That was something rare not only in the world but in China's own development history," said Pan Jiancheng with the National Bureau of Statistics (NBS).

The growth was achieved with the help of prudent and neutral monetary policy as well as more proactive and effective fiscal policy, as determined by the economic work meeting last year.

Rather than adjusting interest rates or reserve requirement ratios, China's central bank has increasingly relied on open market operations this year for liquidity management.

Strong economic momentum helped cross-border capital flows become more stable and balanced, contributing to a gradual pick-up in foreign exchange reserves, which rose for the 10th month in a row to 3.1193 trillion U.S. dollars at the end of November.

STRUCTURAL PROGRESS

Just three minutes into China's Singles' Day, on November 11, sales of Alibaba's online shopping site TMall hit 10 billion yuan (about 1.5 billion U.S. dollars).

Consumer enthusiasm toward the shopping event highlights how China is making the transition to a consumption-driven economy from investment-fueled growth.

Wang Tao, chief economist with UBS China, estimated that consumption would grow at an annual rate of 7 percent at least in the next two years thanks to rising incomes and demands for high-quality living.

To meet demand, the world's factory is upgrading what it puts on the shelves. Production of low value-added consumer goods are gradually being replaced by high-end manufacturing, with shipments of smartphones from China accounting for a quarter of the world's total.

"'Made in China' does not stand for 'cheap' anymore. China's high-speed railways, nuclear power, and electronic products are all making breakthroughs in the global medium and high-end industries," said Chen Dongqi, an economist with the Academy of Macroeconomic Research.

While high-tech manufacturing registered rapid growth, China also made headway in phasing out overcapacity, one of the major tasks in the ongoing supply-side structural reform.

China has accomplished its plans of slashing steel production capacity by around 50 million tonnes and coal by at least 150 million tonnes this year, according to NBS.

RISK CONTROL

Perhaps one of the most remarkable achievements that China made in 2017 was not the growth rate per se, but how it accomplished it with tighter regulations aimed at containing risks.

In the past year, China's leaders have made financial stability one of their top priorities and have made notable progress in their bid to bring to heel some of the major "gray rhinos," generally shadow banks that pose a significant threat to the economy.

Authorities have tightened their grip on interbank activities and off-balance-sheet wealth management products (WMP), and passed or expanded restrictions on house purchases to rein in real estate bubbles.

Amid the clampdown, WMP growth slowed sharply from a year earlier, while the house-buying fever also cooled in hotspot cities, with both new and second-hand home prices in first-tier cities posting slower year-on-year growth for the 13th consecutive month in October.

In the meantime, China is also trying to have a healthier balance sheet, cutting leverage by reducing its liabilities. It has set debt ceilings for local governments, and introduced a debt-for-bond swap program.

According to global ratings agency Moody's, the economic and fiscal performance of Chinese local governments was stable in the first three quarters of 2017, and full-year targets will be met. Enditem