Start new growth engines

THE SEEMINGLY BUMPY START FOR THE CHINESE economy has recently sparked talk of possible stimulus measures.

While cautioning against overreacting to a short-term loss of growth momentum, however, Chinese policymakers should focus on steadily boosting domestic demand.

That means the government can both speed up high-return investment to facilitate industrial restructuring and beef up the safety network to ignite domestic consumption.

Weak economic data and looming signs of financial risks have added to worries about the health of the world's second-largest economy.

On Monday, the World Bank trimmed its 2014 growth forecast for China to 7.6 percent, down 0.1 percentage point on its previous forecast in October. The Washington-based development bank has based its forecast on China's slowed industrial growth and contracted exports in the first two months of 2014, but expects quarterly growth to rise midyear as external demand from the high-income countries solidifies.

The World Bank's forecast may be quite close to the growth figures that the Chinese government is to release soon.

Nevertheless, the business-as-usual suggestion that the country's economy will rebound on stronger exports should not be taken seriously by Chinese policymakers, who are trying hard to strike a balance between steady growth to create enough jobs and economic transformation for long-term growth.

Instead, in the face of the unexpected slowdown, policymakers should press ahead with key reforms to expand domestic demand and cut the dependence on exports and investment in industries with serious overcapacity.

Part of such efforts are plans to cut taxes for small firms and speed up the construction of railway lines. They can also include more investment to increase the supply of welfare housing in major cities to make the country's ongoing urbanization drive more inclusive and sustainable.

For those who are worrying about the lingering side effects of the stimulus package during the global financial crisis, it is certainly reasonable to caution against any similar stimulus measures to merely offset a short-term slowdown.

Yet, timely adjustments in monetary or fiscal policies to help fix long-term problems in releasing the great potential of Chinese consumers is another thing.

More investment and government spending on welfare programs such as subsidized housing, public health and education may not stop the current economic slowdown. But they are necessary to set in motion the country's new growth engines.