Analysts believe that
a sharp deterioration in the
employment situation could be the
'last straw' that forces changes in
economic policy, although it's not
yet clear what the government's
bottom line for growth is this
year.
Whether GDP grows 7
percent or 7.5 percent is still a
subject of hot dispute. One is
the point at which the jobless
rate may surge out of control.
The other is the government's
full-year target.
The second
quarter's weaker-than-expected GDP figure
of 7.5 percent, the lowest level in
a year, was a sign of slowing
momentum that could narrow the safety
margins of the world's second-economy
against shocks.
Although headwinds
may increase in the second half
because external and domestic demand
is likely to remain sluggish, the
government led by Premier Li Keqiang
is determined to promote a growth
pattern shift from investment-driven to
one more consumption-oriented.
The
government aims to strengthen the
contribution of the services sector
and keep unemployment low.
To
ensure stable employment seems much
more important at the moment than
locking a specific bottom line of
growth, said Wang Jun, deputy
director-general of the consulting research
department of China Center for
International Economic Exchanges, a
Beijing-based government think
tank.
Wang noted that when
GDP growth falls below 7 percent, the
small and medium-sized enterprises that
generate most jobs in China are
at an increased risk of bankruptcy.
Factory workers, especially rural migrants,
will lose jobs in the first
wave.
During the global
downturn, the government began a 4
trillion yuan ($651 billion) stimulus package
after GDP growth slumped to 6.6
percent in the fourth quarter of 2008
from 9.8 percent in the third. During
the downturn, many SMEs in coastal
areas shut down and fired their
workers.
Zhu Baoliang, an
economist at the State Information
Center, a think tank under the
National Development and Reform Commission,
said that the "safe zone" for
unemployment is 4 to 5
percent.
"As long as we
stay within the range, there will
be no need to stress the
'floor'," said Zhu.
Jing
Ulrich, managing director and chairwoman
of global markets for China at
JP Morgan, said that the new
leadership has a greater tolerance for
slower growth, compared with years
earlier.
She said that the
government may be willing to tolerate
a minimum growth rate of 7
percent.
Another influence on
policy will be the inflation rate,
which economists believe could be less
than 3 percent this year. The
government's target is 3.5
percent.
Ma Jiantang, director
of the National Bureau of Statistics,
told Xinhua Net in an interview
that both downside pressure and
rebound momentum will "coexist" in the
second half.
"As the reform
motivation and potential will be
further stimulated, the whole economy
will maintain stable growth and
finally achieve the targets with
efforts," Ma said.
Economists
believe that more detailed reform
measures will be released in the
third quarter, especially in the
financial and service
sectors.
On Friday, the
People's Bank of China, the
central bank, scrapped the floor on
bank lending rates, which was seen
as a big step toward a free
interest rate system.
The
State Council, China's cabinet, is
encouraging more private capital to
participate in the financial system
and open banks at the county
and village levels.
Barclays
Capital economists Chang Jian and Joey
Chew said the service sector will
be the new growth engine for
China. "Services development is the
supply side of the Chinese rebalancing
equation and goes hand-in-hand with
strengthening private consumption," they
said.
