Restructuring must go on

The bearish trade data, a prelude to the country's release of its GDP growth figure on Monday, are set to disillusion those who had pinned their hopes on a change in the stance of reform-minded policymakers and who hoped for a stimulus to bail out the economy.

Exports fell by 3.1 percent year-on-year in June, the first decline since January 2012, while imports dropped by 0.7 percent, according to the General Administration of Customs. Both were far short of market expectations.

With weakening external demand and lackluster internal demand, the world's second-largest economy faces growing pressures. The latest trade figures unequivocally show that the challenges stemming from the economic slowdown will become harsher in the second half of this year, if the current trends remain unchanged.

Yet given China's unchanged focus on restructuring its economy and pressing ahead with its reform agenda, there is only a remote possibility that the government will launch a major stimulus package to boost the economy.

Noticing the unshaken stance of Chinese policymakers and the weakness in the global economy, the International Monetary Fund on Tuesday cut its growth forecast for China this year to 7.8 percent from 8.1 percent.

Rising prices are adding to the challenges. The consumer price index, which gauges consumer inflation, rose 2.7 percent compared with a year ago, the highest rise in four months.

However, these challenges are unavoidable if the country sticks to its reform agenda, which it must do.

After three decades of fast growth, the country must start to tackle the structural problems that have accumulated or it will be too late to embark on a new development mode centered on domestic demand. If the restructuring process had been started earlier, it would have encountered fewer difficulties.

Restructuring comes at a price, and now the price is higher. China will no longer be able to achieve the high growth rates it enjoyed before if it wants to make a successful transition to a sustainable economy.

However, it is a price that needs to be paid, as the country can no longer afford to delay the necessary reforms, despite the growing risk from an economic slowdown.

(China Daily 07/11/2013 page8)