Signs of cooling welcome
Updated: 2011-07-14 07:57
(China Daily)
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Call it a slowdown if you like.
China's economic growth did dip slightly from 9.7 percent in the first quarter of this year to 9.5 percent in the second quarter. The latest figure even marked the slowest pace of growth since the third quarter of 2009, when the world economy was just pulling itself out of the worst recession in more than 70 years.
However, while Europe's sovereign debt troubles are escalating and unemployment in the United States remains stubbornly high, the resilience of the Chinese economy is proving greater than expected.
Given the increasing fragility of the ongoing two-speed global recovery, it is surely reasonable to caution against a severe pull back on China's economic growth, which nowadays accounts for an important part of global growth.
It makes no sense to exaggerate the possible risk of a more serious growth setback when Chinese economic data compellingly rules out a hard landing any time soon.
Instead, for Chinese policymakers, the burning task is to stick to tightening policies in the country's uphill fight against accelerating inflation, which is entering a critical phase that allows for no policy pause.
The 9.6-percent year-on-year growth in the first half of this year shows that the world's second largest economy is still on a stable and fast growth track backed by rapid urbanization. More importantly, it indicates that China still has room to tighten policies without choking growth.
With consumer inflation hitting a three-year high of 6.4 percent in June, the country's central bank has hiked interest rates three times so far this year and increased the reserve requirement ratio for domestic banks to a record high of 21.5 percent.
To ease public worries about the soaring inflationary pressures, policymakers have tried hard to demonstrate their firm resolve to corral price hikes with all necessary means.
It is even widely reported that, in absence of new price shocks, the country's consumer inflation may stabilize, if not peak, in the coming months.
A bumper summer harvest in China and a temporary fall in commodity prices in the international market will certainly help the country to rein in inflation.
Nevertheless, it is simply too early to take it for granted that the ongoing surge in consumer prices will come to an end soon given the rising long-term costs of raw materials and labor.
For instance, rather than being mainly a result of supply shocks, the 57.1-percent jump in the price of pork in June over the same period last year, was closely related to the soaring cost of labor and pig feed. Latest statistics show that urban residents' disposable incomes increased by 13.2 percent while rural residents' cash income jumped by 20.4 percent from a year earlier in the first six months.
The shocking fact that China's foreign exchange reserves have risen by more than 30 percent year-on-year by the end of June to about $3.2 trillion also points to more inflationary pressures fueled by inflows of "hot money" into China. That is a cause for more tightening, not less.
China Daily