China charts course to navigate economic headwinds

Reform, opening-up and consumption will be China's major tools to help keep the economy growing steadily during the next half of this year and beyond as the country's policy-makers have unveiled a general roadmap to help navigate through economic headwinds.

Employees of an engineering machinery manufacturer in Shandong province work on the company's production line of loaders. [Photo/Xinhua]

The Political Bureau of the Communist Party of China (CPC) Central Committee held a meeting on Tuesday, reviewing the economic situation and setting the tone for future work.

The meeting came as the world's largest developing economy faces downward economic pressure. Official data showed Wednesday that the country's manufacturing activities continued to stay in the contraction zone in July.

"As the Chinese economy faces new risks and increasing downward pressure, the country should focus on long-term trends and key issues so as to turn crises into opportunities," a statement released after the meeting said.

According to the meeting, China will continue to implement proactive fiscal policy and prudent monetary policy. Policies of cutting taxes and fees should be further implemented.

"Cutting taxes and fees serves as the main means of positive financial policy and the key for implementing it is to evaluate the effectiveness of the policies carefully and offer sufficient supportive work," said Yang Zhiyong, a researcher with the Chinese Academy of Social Sciences.

China's central bank has raised its re-lending quota by 50 billion yuan (about US$7.3 billion) to boost financial support for small and micro firms and private businesses.

The financial research center of the Bank of Communications noted that the financing structure is expected to be optimized as the meeting called for the sci-tech innovation board to properly implement its registration-based initial public offering system with information disclosure at its core and improve the quality of listed firms.

While the country will take targeted measures to support the development of private enterprises, the meeting also called for accelerating the clearing of "zombie companies."

The statement also noted that China will adhere to the principle of "housing is for living in, not for speculation," reflecting the determination to ensure the stable development of the real estate market in the long-term.

Wang Tao, an economist from UBS, maintained that the statement and recent tightening are mainly intended to prevent too many resources from going into the property sector rather than to weaken the property market in any significant way.

The statement called for more efforts on deepening the supply-side structural reform and expanding the domestic market.

"Domestic demand will benefit from policies on increasing the property income of rural residents and improving the quality of medium- and high-end consumer goods," said Li Chengjian, a researcher from the Development Research Center of the State Council.

To further boost cultural consumption and the tourism sector, a State Council executive meeting Wednesday called on local authorities to cut or exempt ticket prices of scenic areas, with nighttime catering, shopping and performances encouraged.

Development of the e-commerce sector in rural areas is required to be further promoted, encouraging the improvement of cold chain logistics of agricultural produce.

Noting that a series of recent policies aim to push forward reform and opening-up, Tu Xinquan, a professor at the University of International Business and Economics, expected that the next round of reform will be deeper and the speed of opening-up will be faster.