Opinion

Growth to retain momentum

By Yi Xianrong (China Daily)
Updated: 2010-06-28 07:58

Extant uncertainties are unlikely to scuttle the robust dynamism shown by the Chinese economy

The government's stringent regulation of the property market, recent volatility in stock prices and the sovereign debt crisis in Europe have led some to conclude that China's economy is once again at a crossroads.

Increased risk of the global economy slipping into a recession once again, and growing inflationary worries back home have forced many analysts to believe that the government will likely put a stop to curbs on property sales like it did in 2008, and accord top priority to boosting economic growth.

Such concerns are groundless.

China's economy is neither facing such a dire situation, nor is it witnessing enormous changes as it did two years ago.

Declining share prices and tumbling home sale volumes have not rocked its solid economic foundation.

Investment, export and consumption, the so-called "troika" of the nation's economy, have all shown remarkable progress in the past months.

Compared to the same period last year, investment in the country's fixed assets has increased by 25 percent during the first five months of the year.

Investment in the real estate sector, a major component of fixed assets, grew by 39 percent in the first five months, 30 percentage points higher than during the same period last year.

Investment in the housing market is growing at a fast clip, as indicated by the additional funds pouring into the sector as well as the rapid increase in new home starts and land transaction volumes.

Many analysts worry that the curbs on realty purchases might impact negatively the nation's gross domestic product growth as well as the sector's revenues.

The real impact on China's macroeconomic situation and GDP growth - due to the current regulatory tightening - will only be felt starting next year, since there is typically a 12-month lag before such curbs take effect.

However, the government is likely to offset any likely fallout through some careful planning.

One effective step will be to invest more in government-backed homes, which will thwart any lingering slump in domestic property sales.

China's exports, the other key pillar of the national economy, showed a year-on-year growth rate of 48 percent in the first five months of 2010.