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On a strong rebound

(China Daily)
Updated: 2009-10-23 08:39

China's V-shaped recovery, as expected, gained further momentum in the third quarter to justify a recent change in policy tone by the central government. The job ahead is to seize the looming window of opportunity over the next few quarters to focus on the quality of economic growth.

Latest statistics show that China's economic growth accelerated further in the last quarter to 8.9 percent compared with year-on-year growth of 7.9 percent in the second quarter and 6.1 percent in the first quarter. As a result, the Chinese economy expanded 7.7 percent year-on-year in the first nine months of 2009 - much faster than any other major economy.

Such a strong recovery should bring to a decisive end the skepticism abroad about the country's capability to keep its economy growing fast enough for creating enough jobs and maintaining social stability. The full-year growth target of 8 percent, over which doubts were cast by most outside observers at the beginning of the year, is undoubtedly within reach now.

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As a matter of fact, China, the world's third largest economy, is rapidly rendering itself into an increasingly important global locomotive at the moment when the world economy has been suffering from the worst recession in many decades.

Chinese policymakers should take credit for not only effectively arresting the sharp economic downturn at home. By doing so, they have also given a huge boost to international confidence in fighting the global financial and economic crises.

However, a clear change in policy tone at the State Council meeting on Wednesday shows that Chinese policymakers have looked beyond the part of the job that they have done.

The State Council made it clear that in the remaining months of this year, the policy focus would be to "balance the relationship between boosting growth, rebalancing the economy and managing inflation expectations". This ostensibly represents a departure from previous policies that have taken growth speed as the top priority.

As the country's recovery continues apace, concerns over growth are swiftly shifting to worries about policy tightening. Meanwhile, some also suggested that policymakers have to figure out how to wean the economy off State support.

Chinese policymakers should certainly pay attention to these possible problems. But if the government can pump more public spending into improving health care, education and social welfare, the country has a great chance to reduce dependence on investment-led growth while boosting domestic consumption into a major growth engine.

A balanced recovery is no easy job for both China and the world economy. Yet, Chinese policymakers are clearly trying to grab the opportunity for change that the current rebound offers.

(China Daily 10/23/2009 page8)