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China Focus: China fine-tunes growth trajectory, quality trumping speed

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BEIJING, July 22 (Xinhua) -- Fast or high-quality growth? It's the constant battle policymakers worldwide face when dealing with the economy.

As China shifts away from its days of blistering, unsustainable growth to steadier foundations, balancing speed and quality remains difficult.

While policymakers are fine-tuning policies to bring fresh ideas and emerging businesses for balanced, environmentally sustainable growth, labeled the "new normal" by President Xi Jinping, they also face the difficulty of maintaining jobs as the country adjusts to slower growth.

Jilin Province in northeastern China, where President Xi made a recent inspection, couldn't provide a better face for the change being undergone by China's economy.

Once a hub for heavy manufacturing the region is now trying revive its economy by creating new industry, developing modern agriculture and improving the service industry.

While meeting with provincial officials, Xi urged better quality, better structure and higher profitability as the province switches gears to adapt to the current economic direction.

Xi said that more efforts should be made to push forward the innovation drive to boost the vigor of society.

While slowing the economy to focus on quality is needed to create a sustainable future, so is job creation.

One of the biggest blockades for China's restructuring has been generating enough jobs for the world's most populous nation.

This year an estimated 7.5 million college graduates will fight for positions in the toughest job market ever. While the focus for the government is better quality, many economists believe China must maintain a medium-high growth in the near future to fulfill job creation needs.

China has pledged to create more than 10 million urban jobs and ensured that the registered urban unemployment rate does not rise above 4.5 percent in 2015, even as economic expansion slows to the lowest rate for 24 years, hitting 7.4 percent in 2014.

Observers have found policies such as tightening excessive credit growth and local government debt have been partially offset by several targeted measures to spur private consumption, revive housing sector and invest in infrastructure to prevent growth from slowing sharply. The belief behind such measures is that a stable social environment makes restructuring efforts easier.

China should focus on fine-tuning and structural adjustment of the macro-economy, preventing the volatility that comes with abrupt policy switches, said Li Yining, a leading Chinese economist.

But the long-expected economic restructuring has been given more weight as the government further lowered this year's growth target to approximately 7 percent, giving itself more room to maneuver in adopting economic reforms to address long-existing structural problems like reliance on exports of low value-added goods.

China's growth slowdown is not unexpected, and it is "desirable from a short and medium-term perspective", as the country prioritizes balancing reforms and managing short-term demand, the World Bank commented earlier this month.

China's near-term economic moderation reflects policies to slow rapid credit growth, contain shadow banking, limit borrowing by local governments and reduce excess capacity in industry, which address the vulnerabilities that built up after the 2008 global financial crisis, the World Bank said in its latest China Economic Update report.

This view is shared by experts including David Lipton, first deputy managing director of the International Monetary Fund (IMF).

"Growth in China is moderating -- a slowdown that is not a goal unto itself but a by-product of moving the economy away from the unsustainable growth pattern of the past decade," he told Xinhua in a recent interview.

Chinese policymakers are pursuing a "quality-growth" strategy, and "they are not trying to achieve the fastest possible growth, but rather the fastest sustainable growth."

Experts like Lipton do not believe China's economic restructuring to be an easy path, but the challenging transition is necessary from the long-term perspective. Some economists argue that the nation's restructuring has been delayed by the financial crisis and now it should step on the gas pedal.

The authorities should use multiple instruments including fiscal policy, interest rate liberalization and other financial reforms as well as price reforms to increase the prospects of reducing economic imbalances and facilitating the desired transition to a more consumption-driven growth path, suggested Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics, a top U.S. think tank.


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