Growing pains point to future strength

LI FENG/CHINA DAILY

The Chinese economy expanded by 6.9 percent in the third quarter, falling below the psychologically important level of 7 percent for the first time in six years, latest statistics show.

At a moment when the world economy is bracing for expected annual growth of 3.1 percent, the worst since the global recession of 2008, China's slowdown will surely add to concerns over the health of the global economy.

But a closer look at the structural changes that are taking place in this country should actually guarantee more confidence than consternation over the performance of the world's second-largest economy. As Chinese President Xi Jinping pointed out in an interview with Reuters before his visit to the United Kingdom, the Chinese economy is experiencing growing pains as it shifts from old drivers of growth to new ones.

The country's industrial sector is battling overcapacity at home while trying to cope with the sluggish global demand. Naturally the growth of China's value-added industrial output is slowing and electricity consumption, a key barometer of economic activity, edged down 0.2 percent in September.

Yet, far more important than the power consumption drop is that the electricity used by the service sector jumped 7.3 percent in the first nine months while that for the industrial sector fell 1 percent from a year earlier.

Such different rates suggest the long-anticipated shift in China's economic structure is materializing and the service sector is growing bigger than the power-consuming industrial sector. In fact, in the first three quarters, the service sector contributed 51.4 percent to China's GDP, compared with the 40.6 percent share of the industrial sector.

Another equally encouraging change is domestic consumption, which has so far defied all the headwinds to grow steadily. China's retail sales of consumer goods grew 10.9 percent year-on-year in September, slightly higher than 10.8 percent for August. This was the highest rate of growth since the beginning of the year.

The significance of these changes goes far beyond their immediate push for the economy. If sales of consumer goods continue to grow steadily, it is likely that expanding domestic consumption will well help a mild recovery in growth in the next few months.

And if the service sector and domestic consumption can be further boosted in the middle and long term to become new drivers of growth, China will have very promising economic prospects that will benefit the world economy as well as itself.