Growth pivot clouds 'reform and rebalancing'

Policy priorities have quietly shifted, but some say fine-tuning not enough

China's second-quarter economic growth turned the corner after a weak first quarter, but the government's increasing pivot to growth has many worried that the "reform and rebalancing" agenda is taking a back seat.

Those concerns are not groundless. After first-quarter growth dipped to an 18-month low of 7.4 percent, policymakers and market participants debated whether the government needed to act swiftly to safeguard the "around 7.5" percent official GDP target.

Key growth targets well within reach

Infographics: China's GDP growth since 1978

The debate grew more intense after discouraging statistics for April were released. Officials still insisted publicly that a large stimulus package was unnecessary as long as employment was healthy. But policy priorities have quietly shifted, and that has been reflected in numerous ways.

Since May, unnerved by the continuously sagging property market, the government announced a raft of measures, including reductions in some banks' required reserve ratios and instructions to local governments to expedite spending.

The government described these moves as "fine-tuning", but many contend that "fine-tuning" failed to capture the actual scale. The unexpected upsurge in bank lending in June ($174 billion, nearly 20 percent more than market expectations), the hefty increase in fiscal spending (26.1 percent growth in May and 24.6 percent in June) and the increasing number of cities being allowed to ease property curbs all are taken as signals of China's increasing seriousness about its 7.5 percent growth target.

The extra efforts paid off. Second-quarter GDP growth picked up to 7.5 percent. But it was not enough, apparently, to relieve top leaders, as downward pressures have persisted into the second half.

On July 16, the same day that the National Bureau of Statistics released second-quarter data, Premier Li Keqiang said at a cabinet meeting that governments at all levels "must ensure" that the annual economic target is met.

It was just three months ago, at the Boao Forum for Asia, that he vowed the government would not resort to short-term forceful stimulus measures in response to passing economic conditions.