Reform tests the flexibility of China's economy
- By Xu Gao
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E-mail China.org.cn, March 11, 2015
Policies will continue to be friendly to the real estate market
The tone of the government work reports on the real estate market has changed from "constraining speculative investments" last year to "supporting housing demands among residents for the purpose of self residence or the improvement of living conditions."
In the current economy, when funding for infrastructure construction is limited and the trend of scaling down capacity is prevailing in the manufacturing industries, the housing market will become one of the few driving forces to maintain economic growth. With more and more local governments lifting restrictive policies on house purchasing and relevant loans in the market, the real estate market will find itself in the embrace of a friendly environment.
The continuation of reform is the focal point of the Report
Generally speaking, reform will move steadily along the path designed by the government. Tangible measures such as the relegation of administrative approval powers, the change of business tax to value-added tax and the upcoming shift to a registration-based IPO system in the capital market – all of which are expected to be carried out soon – will bring few surprises for the market.
This year's Government Work Report is consistent with the previous ones in pushing forward reforms in major sectors and establishing pilot programs in certain areas for some policies before consensuses are reached. As reform evolves, the benefits generated by it will start to positively affect the real economy. Market entities have already begun burgeoning within a year of the initial streamlining of the administration and the regulation of powers.
Other economic figures set in the Report are within expectations
Even though the government has lowered the Consumer Price Index from last year's 3.5 percent to 3 percent, it is still below the market forecast. Therefore, it will put fewer restrictions on macro policies and will leave plenty of room for price reform. The M2, a measure of money supply, is also only 0.2 percent lower than last year's 12.2 percent, which probably means that loosening monetary policies are running within limits.
All in all, the policies carried out this year will test the tolerance of our economy for pursuit of stable growth during reform. However, the setting of fiscal and monetary policies verifies that the government is less likely to guarantee minimum growth. Therefore, the risk of volatile economic growth will increase during the trial period of the country's ongoing reform.
The writer is the chief economist of Everbright Securities Co., Ltd.
The article was first published in Chinese and translated by Wu Jin.
Opinion articles reflect the views of their authors only, not necessarily those of China.org.cn.
