China's economy faces increasing downside risks as proved by the newly-released economic statistics.
China's exports in the first five months of 2012 increased 8.7% year-on-year, lower than the annual 10% target, according to the General Administration of Customs (GAC).
China's fixed-asset investment rose 20.1% year-on-year to 10.89 trillion yuan in the first five months, marking the third consecutive monthly slowdown, according to the National Bureau of Statistics (NBS) of China.
Together with the still grim real estate market and the bearish stock market, the economic data demonstrate that China's economy outlook might be gloomy.
POLICY FINE-TUNING
The global economy is on the whole on the path of recovery, although the progress is very slow.
Many governments have realized that it is important to boost the real economy, reduce imports and increase exports, which is more significant to China's economy.
In the future in China, more efforts should be made to expand consumption to facilitate self-geared growth, to implement the structural tax reduction to benefit enterprises, to guide and supervise banks to better serve the real economy so as to transform the economic development mode. In the meanwhile, improving people's livelihood should be a top priority.
Economic statistics in May showed that the macro-policy fine-tuning has been taking effect as China's exports and property sector began to warm up.
With policies being drafted or introduced to expand investment, accelerate approval for construction projects, and support the private economy and small- and micro-sized enterprises, China's economy is likely to pick up at the end of the second quarter.
Also,the current policy fine-tuning measures will be enough for maintaining growth, and it is not advisable to adopt monetary and fiscal expansion policies as bold as those in 2008, warning against overreaction of additional and superimposed policies.
STIMULATE CONSUMPTION
The target of China's 12th five-year plan is set to improve the proportion of people's income in the distribution of the national income and the proportion of labor remuneration in the primary distribution of the national income.
In the past, the growth rate of people's income was lower than that of GDP when the economy grew rapidly, but higher than that of GDP when the economy slowed down.
The situation has changed. The GDP rose 8.1% year-on-year in the first quarter, 1.1% lower than the annual growth rate of 9.2 percent in 2011. But the disposable income of urban residents and the net income of rural residents in the first quarter rose 9.8% and 12.7%, respectively, compared to 8.4% and 11.4% for last year.
The most phenomenal feature of the consumption market this year is that the nominal growth rate is sliding while the real growth rate is on the rise slightly. Expanding household consumption constitutes an important part of the strategic adjustment of the national economic structure.
China should not take rush steps to achieve quick success in expanding consumption, but should keep an eye for the long term.
For the time being, consumption remains stable and there is no need to boldly adjust short-term demand management policy to spur consumer demand. And another round of stimulus policies for the real estate, auto, household appliance and tourism markets may foul up people's consumption speed and overdraft growth potential.
As for the real estate market, some people expect the government to loosen its tight regulation amid the economic slowdown.
If the government relaxes its control, the property market will see a rebound, thus wavering China's economy as a whole. China should keep its firm stance on the real estate market to prevent a rebound and draft property tax to guild reasonable consumption.
PRIVATE INVESTMENT
In the first five months of 2012, China's total investment rose 20% year-on-year, while its private investment rose 26%. And private investment contributed 80% of the 20% increase.
Private investment become the largest contributor in stabilizing investment growth rate. Chineses government should take targeted measures to guide private investment into cash-strapped industries, such as education, service, and energy sectors.
It is imperative to create a favorable policy environment for private investment and encourage private investment to go to previously monopolized sectors.
Moreover, some local governments may intensify tax collection and management efforts as their tax revenue decreased. It will be harmful to the overall economy if local governments levy more taxes on enterprises at a time when they are in hardships.
Chinese local governments need to keep a sober mind amid the stagnant economy to better handle the relationship between government tax revenue and tax sources.
