China’s slower expansion in the first quarter is “normal” as the world’s second-largest economy sacrifices growth to make structural reforms, People’s Bank of China (PBOC) Governor Zhou Xiaochuan (周小川) said.
While a “mild” slowdown in the global economy does have an impact on China, the 7.7 percent growth rate in GDP is “overall normal” compared with the government’s target of 7.5 percent for this year, Zhou told reporters outside a meeting of the IMF in Washington on Saturday.
“China’s undergoing economic restructuring, which sometimes is not in lockstep with growth,” he said. “We need to sacrifice short-term growth for the purposes of reforms and structural adjustments.”
The nation’s expansion in the first quarter missed the 8 percent median of economists’ forecasts compiled by Bloomberg and slowed from a rate of 7.9 percent in the previous three months, when Asia’s biggest economy emerged from a seven-quarter slowdown.
Chinese Premier Li Keqiang (李克強) said earlier this month more efforts should be made to improve the quality and benefits of economic development, focusing on restructuring and upgrading, as the government seeks to shift away from an export-reliant growth model.
The economy had a stable start in the first quarter and growth was within a reasonable range, Zhou said at the IMF meeting, according to a statement posted on the PBOC’s Web site yesterday.
Goldman Sachs Group Inc, Royal Bank of Scotland PLC, JPMorgan Chase & Co and Australia & New Zealand Banking Group Ltd last week cut their estimates for China’s expansion this year to 7.8 percent after the worse-than-forecast performance in the first quarter. That would be the same as last year’s pace, which was the weakest in 13 years.
The Shanghai Composite Index of domestic Chinese shares sank 1.1 percent on Monday last week to the lowest level this year after the GDP data. The gauge rebounded later for its first weekly gain in a month.
The pace of economic growth in the first quarter marked the first time in data going back two decades that four periods in a row have seen expansion of less than 8 percent.
China’s long-term growth rate may be limited by declines in the working-age population, income gains that are pushing up costs and public concern at the environmental toll from polluting factories.
Li pledged last year to open the economy to more market forces and strip power from the government as part of efforts to restructure the economy.
The statement cited views the Chinese delegation expressed to the meeting of central bank governors and finance ministers from the G20 nations in Washington last week. Zhou and Chinese Finance Minister Lou Jiwei (樓繼偉) both took part in the event.
“China’s structural adjustment has scored notable achievements,” according to the PBOC statement.
The contribution of service industries to economic growth in the first quarter exceeded that of manufacturing for the first time, it said.
In his statement to the IMF, which was posted on the lender’s Web site, Zhou reiterated that changes in China’s financial sector will involve “further interest-rate liberalization, capital account convertibility and exchange rate reform.”