Economic Optimism

Though facing challenges， the Chinese Government has kept a steady hand on the tiller and managed to sail the economy through the first half of 2016 relatively unscathed， sustaining steady economic growth and accelerating economic transformation. According to a report recently released by the National Bureau of Statistics， Chinas GDP growth in the first half of 2016 was 6.7 percent year on year.

A slowing growth rate， in relation to past stellar economic performance of around double-digit growth， has， however， given rise to questions about the development trend of the worlds second largest economy. What will be the highlights of the second half of the year？ What will be the impact of Chinas economic growth on the global economy going forward？ Renowned experts in this field believe there is much resilience and potential for Chinas economy to maintain a stable and healthy growth. Some of their views follow：

Justin Yifu Lin Former Chief Economist of the World Bank and Professor at the National School of Development of Peking University

Above 6.5 percent possible

In the current global economic situation， the developed economies， due to a lack of strong government support for carrying out structural reforms - unlike China - are likely to experience an economic slowdown， similar to what Japan has been experiencing for over two decades. The sluggish external growth environment will have a negative effect on Chinas trade. In this regard， China must rely on domestic demand.

Domestic demand includes investment and consumption. China still has a lot of investment opportunities. Plagued by overcapacity in some sectors， it is necessary for China to continue to upgrade its industries. There is still room for improvement in infrastructure. Compared to other developing countries， China has relatively good infrastructure， but for the most part， investments have been used to improve highways， airports and ports， while urban infrastructure， such as subways and underground pipeline networks， has not been well constructed. The government also needs to tighten environmental protection regulations， as China suffers from serious environmental problems after years of high-speed development.

As China is still in the process of urbanization， this will bring about substantial investments in housing and public infrastructure projects in the future. This is a very good investment opportunity.

China has a good reserve of policy instru- ments to help the country meet various challenges. I believe that it should not be a problem to maintain a growth rate of above 6.5 percent if China makes full use of its policy instruments. This relatively high growth will create a good environment for cutting excessive industrial capacity， downsizing market inventories and deleveraging to guard against risks.

As long as we take advantage of these favorable conditions， China will be able to fulfill its development target， which is to maintain a growth rate of not less than 6.5 percent as set by the 13th Five-Year Plan （2016-20）， and meet the goal of doubling the 2010 GDP and per capita income by 2020. China can also create a good external environment for the supply-side reform， and will continue to be the main engine of world economic growth.

Li Daokui Economist and Professor at Tsinghua University

Factors influencing Chinas economic growth

Chinas economic growth in the second half[of 2016] will depend on three factors： cutting excessive industrial capacity， developing of real estate， and implementing the two-child policy. China will reduce its inventory and cut excessive industrial capacity at a faster pace. Yet， reduction of excessive industrial capacity has certain negative effects on economic growth， as GDP will drop slightly in many areas. I estimate that the real estate market will cool down as many first- and second-tier cities are very likely to release regulatory policies aimed at curbing the skyrocketing housing prices. In fact， economic recovery in the first quarter of 2016， to a large extent， benefited from the recovery of investments in the real estate sector.

After the implementation of the two-child policy in 2016， I estimate that every year about 2 to 3 million additional babies will be born into families with relatively good [living] conditions. This will boost their household consumption.

To sum up， Chinas GDP will show a slight decline in the second half [of 2016]， to a growth rate of 6.7 percent by the end of this year， and 6.6 percent or above in 2017. Chinas economic growth is likely to rebound in 2018. The key to growth lies in whether momentum and enthusiasm for reforms are holding up， whether a series of models for reforms can be established in 2018 and whether relevant local governments and state-owned enterprises are able to promote reforms.

Zhang Maorong Researcher at the China Institute of Contemporary International Relations

Robust in the long term

The Chinese economy is now facing three major difficulties.

First， private investment continued to decline. In the first six months， private investment increased by just 2.8 percent， sharply down from the 11.4-percent growth rate in the same period last year.

Second， cutting excessive industrial capacity could add economic downward pressure. It could also impact the investment in the manufacturing sector， which may lead to a lack of enthusiasm and willingness of related enterprises to expand investment. In the long term， cutting capacity is beneficial to the economic structural adjustment and transition， yet it inevitably increases the downward pressure in the short term.

Third， the foreign trade growth continues its downward trend. Chinese customs statistics show that foreign trade of goods fell 3.3 percent year on year during the first half of this year.

Exports shed 2.1 percent and import declined 4.7 percent.

Looking at the troika of growth， that is private investment， foreign trade and consumption， pri- vate investment is increasingly weak and foreign trade registers negative growth.

Although Chinas economy faces some difficulties， it remains a shining light in the global economy recovery. In tandem with the reasonable expansion of total demand， China has stepped up its supply-side structural reform， explored new innovation-driven development approaches and accelerated the shift of growth models from emphasizing size and speed to quality and efficiency， trying to boost sustained driving forces for growth.

Regardless of the slowdown in global economic growth， Chinas economy has maintained steady growth by virtue of its optimized structure. Consumption and services sectors have become major forces driving the countrys economic growth. These new drivers of growth are rising， while the overall economy is undergoing restructuring and upgrading. Chinas economic conditions remain robust in the long term. As China continues to deepen economic reforms， it is on route to achieving strong， sustainable and balanced growth， and making new contributions to global economic development.