GDP slower but resilient

China's unexpected slowdown in GDP growth in the first quarter will add to the difficulties policymakers face in restructuring the economy, but it is far from being unaffordable, especially given the still sound labor situation.

The country's GDP growth for the first three months was 7.7 percent year-on-year, lower than expected. This has sparked concerns that the nascent recovery that began in last quarter of 2012 has come to a halt.

Such concerns have been aggravated by the latest prediction from the World Bank, which has trimmed its forecast for China's full-year growth from 8.4 percent to 8.3 percent, citing the country's rebalancing efforts.

However, it is still too early to conclude that China's economy has run out of steam. On the contrary, the domestic demand that can be released by the ongoing restructuring coupled with the accelerated urbanization drive may unleash another economic boom.

Especially since the restructuring efforts themselves have contributed to the slower growth in the first quarter. The process of restructuring is coming at a cost, but the gains are worth the pains.

The first-quarter data show that China has made some headway with its restructuring. The value of the tertiary sectors as a proportion of GDP was higher than the same period last year, and the growth of high-tech value added has also accelerated as first-quarter growth was faster both quarter-on-quarter and year-on-year. Meanwhile, the western regions have registered faster growth in terms of industrial output and investment.

Also, despite the mild economic slowdown, the job market remains sound. Official data show that new urban jobs exceeded 3 million in the first quarter while the number of people moving from the rural areas to find work, another indicator reflecting the health of the job market, increased 1.7 percent year-on-year.

The economy therefore remains resilient, and policymakers should not overreact to the slower growth. Looser monetary policy, for example, may temporarily bolster growth, but it will sow the undesirable seeds of trouble in the future.

What policymakers and the public alike should bear in mind is that the country's restructuring is far from complete. Relentless efforts are needed to push forward the country's restructuring and modernization, and the country should be prepared for setbacks thanks to the still prevalent GDP-centered mindset of many officials.

(China Daily 04/16/2013 page8)