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China Rejects Hard Landing Fears

China’s economy will “definitely” be able to maintain medium- to high-speed growth this year, a spokesman for the annual session of the nation’s top political advisory body said on Wednesday, rejecting concerns over a hard landing for the world’s second largest economy.

A slower economic growth of 6.9 percent last year still makes the Chinese economy stand out from the others comprising the global economic coordinate system, Wang Guoqing, spokesman for the fourth session of the 12th National Committee of the Chinese People’s Political Consultative Conference (CPPCC), said at a news conference ahead of the annual gathering which begins Thursday.

“Despite facing an extremely complicated world economic situation, we remain fully confident in China’s economy,” Wang said. “That’s because [the country’s] economic fundamentals will remain sound in the long term, the principal characteristics [of the economy] – strong resilience, sufficient potential and ample leeway – remain unchanged, the basis and conditions which support continued economic growth remain, and there is no change in the trend toward optimizing the economic structure.”

Therefore, there’s no such thing as China heading for a hard landing, the spokesman stressed, noting that such “worries are overblown, and if [some people] have ulterior motives for ‘bad-mouthing’ China, they might not be satisfied with the results.”

The CPPCC spokesman’s remarks could serve to quell increasing anxiety over the Chinese economy. US credit rating agency Moody’s on Wednesday downgraded its outlook on China’s sovereign rating from stable to negative, citing rising government debt and falling reserves, among other concerns.

Fitch Ratings, another US-based credit rating agency, said that it holds on to a stable outlook on China’s sovereign “A+” rating, which balances “China’s still-strong sovereign balance sheet against broader systemic risks and vulnerabilities in the economy,” according to a statement Fitch e-mailed to the Global Times on Wednesday, which quoted Andrew Colquhoun, head of Asia-Pacific Sovereigns at the rating agency.

Nonetheless, Fitch said that it “looks to the forthcoming National People’s Congress for more information on the authorities’ strategy to address structural issues. Decreased clarity around the medium-term economic strategy, or diminished confidence in the authorities’ capacity and willingness to implement it, could be negative for the ratings if they occur.”

Pushing back against skepticism surrounding the economy’s restructuring efforts meant to breathe vitality into the economy over the longer term, Zhang Yansheng, secretary-general of the academic committee of the National Development and Reform Commission (NDRC), told the Global Times Wednesday that China’s economy is in the process of restructuring which will take about 10 years, the success of which will be sufficient proof against hard landing concerns.

“The pace of restructuring may be slower in Northeast China but faster in [Southwest China’s] Chongqing and [South China’s] Guangdong Province. Restructuring in some traditional labor intensive industries may be quicker than in the steel and coal industries,” he said, stressing that “the key is to create a favorable environment for restructuring in the long term and at the same time stabilize growth in the short term. Now that reforms are on the right path, what we need is action.”

Positive signs

Wang also addressed concerns over the economy on several fronts, pledging multifaceted efforts to help boost investor confidence.

Responding to concerns that population growth caused by the new two-child policy might contrast with layoffs at some companies in the country, he said the layoffs are temporary and that the government will maintain population growth in an orderly fashion and guarantee continued economic growth.

“There are neither massive layoffs in Chinese cities nor a mass exodus of migrant workers to rural areas,” Zhang of NDRC said. He also noted economic restructuring, especially involving a reduction in industrial overcapacity, will indeed result in a certain level of layoffs similar to those in the late 1990s.

Back then, employees laid off by State-owned enterprises joined more efficiently run private firms without undermining social stability. Such a problem will not resurface as the current restructuring of industries involves mixed-ownership reforms, and some laid-off workers may also be moved to firms that perform well, analysts said.

China’s economy has slowed since 2012 but employment has risen. That’s because the vibrant services industry absorbs more jobs, though some in the manufacturing industry are laid off, and more jobs are created in the country’s central and western regions despite some layoffs in the east, according to Zhang.

China will also continue to develop a foreign investment-friendly environment and protect the legitimate rights of foreign-invested companies, Wang stressed, denying claims that foreign firms face a deteriorating business climate in the country.

In 2015, non-financial foreign direct investment in China rose by 6.4 percent from 2014, according to data from the Ministry of Commerce.

By LI QIAOYI and SONG SHENGXIA Mar. 3, 2016 on Global Times

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  • The U.S.-China Perception Monitor (中美印象) is an online publication that explores perception and misperception in U.S.-China relations through insightful commentaries, interviews with experts, and profiles on key figures in the bilateral relationship.