Chinese economy set to turn around, no hard landing: finance minister

SHANGHAI Sun Jul 21, 2013 4:40am EDT

Chinese Minister of Finance Lou Jiwei smiles before the G20 finance ministers and central bank governors family photo during 2013 Spring Meeting of the International Monetary Fund and World Bank in Washington, April 19, 2013. REUTERS/Yuri Gripas

Chinese Minister of Finance Lou Jiwei smiles before the G20 finance ministers and central bank governors family photo during 2013 Spring Meeting of the International Monetary Fund and World Bank in Washington, April 19, 2013.

Credit: Reuters/Yuri Gripas

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SHANGHAI (Reuters) - China's finance minister denied that the world's second-largest economy was entering a crisis period, adding that he believed growth could even accelerate, as quoted by the official Xinhua news service in an interview.

The report quoted Lou Jiwei, speaking on the sidelines of the G20 conference on Saturday, saying he expected China's economic growth to end the year at 7.5 percent, the official target rate.

A Xinhua report on July 12 that quoted him saying he expected growth to come in at 7 percent caused brief market confusion, but Xinhua later changed the report to quote him as saying 7.5 percent.

"We see domestic power generation and electricity consumption increased by 4 percent, and the service industry's usage of electricity increased 8 percent," Lou said, arguing that the increases showed efforts to shift China's economy towards services from manufacturing were bearing fruit.

"None of my fellow delegates think China is going to have a hard landing."

The interview was published late on Saturday, a day after Beijing announced it would remove the floor under bank lending rates in a move to free up interest rates, which planners hope will put China's economy on a more sustainable growth path.

Lou said China would continue tax reforms to promote growth, in particular by converting sales taxes to value-added taxes (VAT), while cutting down on paperwork and application requirements for Chinese businesses.

His views were more mixed on the country's real estate industry, which regulators and economists fear is distorted by speculation and fuels inflation.

The industry should play a "normal" role in economic development, he said, adding that its place in China's urbanization project required further study.

Lou said that people talked about rising housing prices, but the industry faced other issues, including surplus housing in some cities and insufficient land supply in others.

"Many developers lack confidence and many buyers are holding back," he added. "Therefore the State Council needs to continue to research the long-term mechanism of real estate development," he said in a reference to China's cabinet.

Lou also warned the United States against exiting from its monetary easing program without considering the impact of the move on the economies of other countries.

(Reporting by Pete Sweeney; Editing by Clarence Fernandez)

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Comments (3)
jeff9360 wrote:
Just regard Luo’s interview opinion as a rubbish totally,as a normal common citizen of China,from my point of view,except these fields,including Real estate,Banking and those monopolized factors such as State grid,China Mobile,China Telecom,Sinopec,PetroChina,China tobacco etc,seldomly can you find a profitable enterprise especially in the area of mini private-run industry in China.

Jul 21, 2013 5:54am EDT  --  Report as abuse
breezinthru wrote:
“None of my fellow delegates think China is going to have a hard landing.”

That statement is not a true reflection of the path China is on. It indicates instead a homogeneity of thought, perhaps even an unwillingness to think the unthinkable.

Throughout history, periods of rapid economic growth have spawned corruption and business decisions based upon greed and hubris, the errant belief that this time, the proverbial piper will just walk away empty handed with a smile on his face.

China’s boom is unmatched. There is plenty of evidence that an unmatched bust is pending. The notion that a soft landing can be engineered is laughable.

Jul 21, 2013 6:22am EDT  --  Report as abuse
Oro_Invictus wrote:
There’s alot I could say here (especially that, unless they allow growth rates to fall considerably [into "hard landing" territory] in the first place, rebalancing cannot functionally occur), I think I’ll let these tweets by Dr. Patrick Chovanec do (some of) the work for me.

https://twitter.com/prchovanec/status/358936707661430784
https://twitter.com/prchovanec/status/358937041758724096
https://twitter.com/prchovanec/status/358937406847729665
https://twitter.com/prchovanec/status/358937893848350721
https://twitter.com/prchovanec/status/358938072148226049
https://twitter.com/prchovanec/status/358938716124889088
https://twitter.com/prchovanec/status/358939221098115072

Jul 21, 2013 11:00am EDT  --  Report as abuse
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