China’s economy is expected to grow about 6.7 percent in 2016, a senior official with the country’s top economic planner said Tuesday.
The economy is predicted to exceed 70 trillion yuan (about 10.1 trillion U.S. dollars) for 2016, an increase of 5 trillion yuan, Xu Shaoshi, minister in charge of the National Development and Reform Commission, said at a news briefing.
The estimate falls within the government target of between 6.5 and 7 percent for the year. In the first three quarters of 2016, the economy expanded 6.7 percent year-on-year.
Steady growth and the performance of new sectors have discredited predictions that China’s economy will collapse or face a hard landing, and its growth rate is remarkable among major economies, he said.
Citing a report by the International Monetary Fund, he said that China is likely to remain the top engine of global growth by contributing 1.2 percentage points, or over 30 percent, of the world’s economic growth in 2016, while the United States is expected to account for 0.3 percentage points.
China is confident and capable of maintaining a reasonable growth rate thanks to its economic structural reforms and emerging new sources of growth, Xu said.
A MORE SUSTAINABLE ECONOMY
As China adapts to a “new normal” of moderate-to-higher growth, it has tried to shift from an export- and investment-driven economy to one that is more sustainable and draws strength from consumption, services and innovation.
During the first three quarters of last year, the service sector accounted for 52.8 percent of value-added industrial output, 13.3 percentage points higher than secondary industry, while consumption accounted for 71 percent of the growth, up 13 percentage points, Xu said.
The economy is in better shape for cleaner development, with a five-percent drop of energy consumption per unit of GDP and continuous declines of major pollutant emissions, he added.
The latest sign of a warming economy came on Tuesday as the National Bureau of Statistics said China’s producer price index, which measures costs for goods at the factory gate, increased 5.5 percent year on year in December 2016, the biggest gain since September 2011, marking the fourth straight month of increases.
STRUCTURAL REFORM PAYING OFF
Meanwhile, China’s supply-side structural reform has delivered initial results in the past year and started to provide new impetus for economic growth, Xu said.
“China has met this year’s target of reducing steel production capacity by 45 million tonnes and coal capacity by 250 million tonnes ahead of schedule,” he said.
Xu revealed that China’s commercial housing inventory had fallen for ten consecutive months, and that enterprises saw production costs cut by 1 trillion yuan last year, thanks to reduced taxation and lower costs on energy, bank interest and logistics.
“China is still a very competitive market and one of the best destinations for foreign investment,” he said.
The reform, proposed by Chinese policy makers at the end of 2015 to resolve structural imbalances in the economy, has focused on five tasks: cutting industrial capacity, reducing the housing inventory, reducing leverage, lowering corporate costs and improving weak economic links.
Xu admitted that corporate debt levels are still relatively high, and the government should work to contain risks from this area this year.
But he noted that despite a relatively higher leverage ratio of non-financial enterprises, the country’s total debt ratio is at a medium level among the world’s major economies.
Xu said that the government’s efforts in the past year had provided valuable experience for solving deeply-rooted problems in the nation’s economy, and that China would embrace a new stage of economic growth.
A TOUGHER BATTLE IN 2017
But for the Chinese authorities, last year was only a start for supply-side structural reform, and they expect a tougher battle in the new year.
“We will adhere to the main theme and take supply-side structural reform to a deeper level,” said Xu.
He said this year the government will set a higher goal for reducing overcapacity and is determined to shut down “zombie enterprises.”
Besides the steel and coal industries, he said the Chinese government will target other sectors with serious overcapacity issues.
In the face of drastic housing price rises in economically strong cities and huge inventories of unsold houses in less developed areas, he said the the government is working on a long-term mechanism to ensure the healthy and stable development of the real estate sector.
Regulators are also looking out for potential risks brought by “irrational tendencies” amid rapid outbound investment growth and are examining irregularities in such investments, according to Xu.
Xu said both the external and internal conditions for China’s economic development in 2017 remain “complicated and grim.”
Uncertainty and instability in the world economy are on the rise, and although the domestic economy is stabilizing, there are still outstanding contradictions and issues, he said.
But with further structural reforms, the Chinese government has the “confidence, condition and ability” to ensure the economy operates within a reasonable range, he said.
China is looking forward to working with other countries to better facilitate world economic recovery by promoting structural reforms, globalization, trade liberalization and investment facilitation, the official said.