Still praiseworthy performance

Slower growth is an indication of country's efforts to make structural adjustments and improve people's livelihoods

China's decelerating growth, the lowest since 1999, is clear evidence that China is bidding farewell to its decades-long double-digit economic growth and entering a period of medium-speed growth.

The 7.8 percent growth of last year was higher than market expectations and more than the 7.5 percent target set by the government in early 2012. The fourth-quarter growth of 7.9 percent, which brought to an end the downturn that had lasted for seven consecutive quarters, heralds an upward tendency in the months ahead.

For a fast-growing economy that is changing its economic model, the 7.8 percent growth was hard-won. The World Bank estimated the 2012 global economic growth at 2.3 percent, with developing countries expected to grow by 5.1 percent. The United States was expected to witness 2.2 percent growth, Japan 2 percent and Germany, which has been performing better than other European countries, 0.7 percent. Of the emerging economies, India was expected to achieve economic growth of less than 6 percent, Brazil less than 3 percent and South Africa less than 2.5 percent.

Despite being its lowest growth in 13 years, China's 7.8 percent growth year-on-year was still praiseworthy in the context of the harsh international economic environment and its ongoing efforts for structural adjustments, which have added difficulties to its struggling export sector. Such a growth margin also smashed rumors that China's economy was in difficulties.

Investment, exports and consumption all accelerated in the fourth quarter of last year, contributing to the country's full-year economic growth. In particular, consumption witnessed strong growth, achieving an actual rise in the fourth quarter of 15.2 percent year-on-year. The actual growth in consumption for the whole year was 12.1 percent, compared with 11.6 percent in 2011. Final consumption contributed 51.8 percent to China's economic growth in 2012, 1.4 percentage points higher than the 50.4 percent contributed by capital.

While obtaining admirable economic growth, progress has also been made in improving people's livelihoods. According to the National Bureau of Statistics, the per capita disposable income of urban residents grew 9.6 percent in 2012, and the net income of rural residents grew by 10.7 percent, both higher than the country's economic growth. The increased incomes of urban and rural residents, together with increased government subsidies for the pension and healthcare networks, lay a solid foundation for the country's goal of doubling residents' incomes by 2020 from the 2010 level.

China's slower economic growth is a result of its efforts to stabilize growth and adjust its economic structure. The rising proportion of services in the country's GDP, which was 45 percent in 2012, 1.2 percentage points higher than 2011, is an indication of China's tangible steps toward economic restructuring.

China has also stepped up structural tax reductions, including extending the trial of turning business tax into value-added tax, raising the threshold for business tax and VAT, and pushing for implementation of previously adopted policies and measures aimed at supporting small-sized enterprises. Data from the Ministry of Finance indicate that China's fiscal revenues grew 11.2 percent in 2012, far slower than the 22.6 percent growth in 2011 and 23 percent in 2010, but an 8 percent reduction in the personal income tax on wage earners and a 12.5 percent tax reduction on those running private companies have also contributed to the considerable rise in residents' disposal incomes.

In the context of global monetary easing, China has chosen a sound and prudent monetary policy. Following two cuts in banks' benchmark interest rates and their reserve requirement ratio during the first half of 2012, China's central bank turned to continuous reverse repurchasing in the latter half of the year as a way of satisfying growing liquidity demands and responding to market demands for further cuts on interest rates and the reserve requirement ratio.

Despite a newly increased loan of 8.2 trillion yuan ($1.3 trillion)in 2012, an increase of 732 billion yuan on the previous year, the growth rate is much lower than the 30 percent growth in 2009 and 2010. This, together with a much slower currency supply, indicates China's adherence to a relatively sound monetary policy. Tightened credit has effectively prevented the eruption of a systematic financial risk in China, and left enough space for its monetary and credit policies to maneuver in 2013.

China's good economic performance in 2012 is also an indication that a moderate economic deceleration should not cause concern. The considerable increase in GDP and government fiscal revenues in the past has accustomed China to economic growth higher than 8 percent. This prompted China to turn to the old investment-driven economic model once concerns arose about an economic downturn. However, the 7.8 percent economic growth in 2012 did not increase unemployment and slow the rise of people's incomes. It should be taken as a lesson that China should not hesitate to change from the pursuit of an excessively high growth to the pursuit of moderate growth and higher economic quality.

The author is an economics PhD at the Beijing University of Science and Technology and an economics commentator.