China stresses targeted policies to balance economy, risks

BEIJING - Chinese authorities will continue to rely on targeted macro policies to support growth in the latter half of the year as downside risks still exist in various quarters.

In a meeting of the Political Bureau of the CPC Central Committee on Tuesday, authorities stressed the need to maintain policy continuity, with more emphasis on targeted steps to balance short-term growth and long-term development.

"China's development has to sustain a certain speed, or else many problems will be difficult to solve," said a statement released after the meeting.

The message is that the government will strengthen existing targeted support to ensure economic growth stays within a proper range, analysts said.

After a shaky start this year, Chinese policymakers have pinned hopes on quickening fiscal spending and selectively easing monetary policies to support faltering growth.

In the first six months, total national fiscal spending expanded 15.8 percent from a year ago to 6.92 trillion yuan ($1.12 trillion). For June alone, the figure surged 26.1 percent to 1.65 trillion yuan.

Spending on key projects in housing security, transportation, urban and rural development, and grain and oil reserves reached as high as 20 percent or more, according to the Ministry of Finance.

"China's fiscal spending in the latter half of the year will maintain momentum, which means more funds will be channelled to the real economy," said Bai Jingming, vice director of the Research Institute for Fiscal Science under the Ministry of Finance.

Along with the proactive fiscal policy, more focus has been put on optimizing credit structure against the backdrop of prudent monetary policy and reasonable credit growth.

The People's Bank of China (PBoC) announced last month that it will cut the reserve requirement ratio (RRR) by 0.5 percentage points for banks engaged in proportionate lending to the farming sector or small and micro-sized enterprises.

On April 22, an RRR reduction was introduced for county-level rural commercial banks and rural credit cooperative unions.

Helped in part by these efforts, China's economic growth showed recovery signs in the second quarter, accelerating to 7.5 percent from the 7.4 percent expansion in first quarter.

To further ease financing costs in the real economy, a State Council meeting last week outlined ten specific measures, including more support to small businesses through relending, cutting redundant procedures, and cleaning up unnecessary charges to give companies in targeted sectors easier access to money.

With these measures steadily implemented, China's economy is expected to firm up in the latter half of 2014.

In light of the stronger-than-expected recovery, banking giant HSBC has upgraded its forecast for China's year-on-year GDP growth to 7.5 percent from 7.4 percent.

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