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China’s GDP grows by 6.7% in first 3 quarters

Author  :  ZHANG JUNRONG     Source  :    Chinese Social Sciences Today     2018-12-06

China’s GDP grew by 6.7 percent in the first three quarters of 2018, in line with expectations, according to data recently released by China’s National Bureau of Statistics (NBS).

According to the NBS, the total retail sales of consumer goods from January to September reached 27.4 trillion yuan, a year-on-year increase of 9.3 percent. In the first three quarters, the final consumption expenditure contributed 78 percent to economic growth, an increase of 14 percentage points over the same period of the previous year.

“Compared with other major economies, China’s economic growth rate is still among the highest in the world,” said Chen Yanbin, deputy dean of the School of Economics at Renmin University of China.

The GDP growth rate for the first three quarters was stable. Although 6.7 percent is not impressive compared with rates over the past four decades, the growth rate of China’s economy continues to be one of the highest among those of the world’s major economies, Chen asserted. The fundamentals of China’s healthy and stable economic growth have not changed, and the conditions for factors of production supporting high-quality development have not changed. The overall trend of long-term stability and positivity has not changed.

According to China’s Ministry of Commerce, since the beginning of this year, the scale of China’s consumer market has maintained steady growth, the consumption structure has been increasingly upgraded, and the fundamental role of consumption in economic growth has continued to increase. In the first three quarters, the consumer market showed that the sales of quality goods prospered, service consumption was upgraded, e-commerce sales maintained rapid growth, the growth rate of rural consumption continued to be faster than that of urban areas, and consumer prices rose moderately.

According to the World Economic Outlook recently released by the International Monetary Fund (IMF), in light of the highly uncertain political environment, the global economy faces downward pressure, and trade barriers are more obvious. Although the financial market conditions in developed economies are still loose, factors such as tight trade tensions and increased policy uncertainties may lead to rapid tightening of financial market conditions.

Monetary policy is another factor that can cause turmoil, the report said. The tightening of financial policies in advanced economies may lead to sharp changes in exchange rates and further reductions in capital inflows in emerging markets. The increased trade tensions are likely to weaken the rules-based multilateral trading system, posing the main threat to the global economy.

Alfred Schipke, the IMF senior resident representative for China, said that global trade growth may slow down in the future. The current international oil price hike and the tightening of financial policies in developed countries will have a negative impact on emerging market countries, but the economies of emerging market countries will remain stable overall.

Looking forward to 2019, Schipke observed that the trend of global economic growth will remain stable. Specifically, advanced economies may slow down in the medium term, but emerging market countries will have more stable growth.

“In dealing with external shocks, the stability of the economy depends on how much inflation expectations are anchored,” said Lian Weicheng, an economist in the IMF’s Research Department. The more they are anchored, the more countercyclical it can operate and the less it is limited to exchange rate fluctuations, which in turn can reduce inflation persistence.

At the same time, how much inflation expectations are anchored depends on the fiscal and monetary policy framework, Lian continued, saying that the long-term sustainability of public finance should be enhanced. Fiscal rules should be established, and fiscal buffers should be rebuilt if necessary. Central banks need to enhance their credibility, along with the independence and transparency of their policy.

Chen suggested that China should adopt a more active macro policy. China needs to actively expand domestic demand to cope with the uncertainties of the external environment. It is necessary to clear the obstacles of the institutional mechanism, effectively promote household consumption and boost private investment.

The country’s fiscal policy should focus on reducing the current high tax burden, and it should more effectively respond to the downward pressure on the economy. Monetary policy needs to maintain stability through liquidity, and its transmission mechanism needs to be strengthened, Chen said, so that a series of policy operations such as the cut to the reserve requirement ratio carried out earlier are effectively transmitted to the real economy

Editor: Yu Hui

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