China attempts to slow down its double digit economy growth

BRENDAN TREMBATH: At a time of World economic uncertainty China continues to grow. Given the enormous impact Chinese trade has on Australia many will welcome this.

But while other countries would give anything for double-digit growth China is trying to slow itself down. And today's growth figures would seem to suggest that's exactly what's started to happen.

In the short term, this might mean less iron ore from the Pilbara will be loaded on ships bound for ports such as Qingdao.

China Correspondent Stephen McDonell reports from Beijing.

STEPHEN MCDONELL: On the face of it official figures released in Beijing today would suggest that China just can't stop itself from growing economically.

GDP compared to this time last year has increased by 10.3 per cent.

But that growth is down from the 11.9 per cent figure recorded for the first quarter.

The Chinese government knows it's drifting into over-production in many areas; that there are goods being produced that nobody wants to buy, or at least not in such large volumes.

And whole suburbs of apartment blocks are being built in places in where nobody wants to move into.

That may be great for Australian exporters of raw materials, at least in the short term, but if the growth is not sustainable then the fear is that one day it could collapse.


So China is trying to slow itself down.

Sheng Laiyun from the National Bureau of Statistics announced the figures and he sees benefits in less growth.

SHENG LAIYUN (translated): An appropriate slowing down of the growth rate will benefit the economy in ways that will prevent the economy from growing fast to being overheated and it will also work in the interest of our economic restructuring and transformation of our growth model.

STEPHEN MCDONELL: Part of China's current over-capacity problems relate to the fall in demand from the United States and Europe. These are places which could once be relied on to soak up just about any cheap goods that this country could produce.

Sheng Laiyun says China, like the rest of the World, is existing in uncertain times.

SHENG LAIYUN (translated): Currently we are still seeing a volatile international economic situations and a sluggish recovery in the world and we need to base our policies upon new circumstances, make them more relevant, more flexible and also we have to try and collaborate the intensity, tempo and focus of our policies.

STEPHEN MCDONELL: At today's press conference the ABC asked if there's a greater underlying problem here for China; that this country's growth has been so heavily export-driven and that this cannot be maintained forever, because Europe and the United States can't keep going into debt forever.

SHENG LAIYUN (translated): China's growth in the past indeed heavily dependent on the drivers of investments and exports and we are very well aware that such a model is not really sustainable in China's case.

The shrinking external demand is really exerting heavier and heavier pressure on our traditional export sector.

STEPHEN MCDONELL: Economist Xiang Songzuo used to work for China's Central Bank.

He agrees that China's long-term challenge is a large one but he thinks that as the living standards of ordinary people increase the country will not have to rely as much on exports.

XIANG SONGZUO: The contribution of net export or GDP growth will keep declining.

STEPHEN MCDONELL: So in other words if China wants to keep growth going it must generate domestic demand?

XIANG SONGZUO: Yes, that's a very challenging- that’s very challenging for every exporters, for every businessman, for leaders from central as well as local governments to keep growth rates.

So we must emphasise the final the consumption but where can the final consumption come from? It must come from increase of disposable income of ordinary people. So that's why we must build up the social security system to encourage the people to spend money and to increase their salary and other sources of income.

STEPHEN MCDONELL: The vast majority of China's huge population still live in pretty modest circumstances. While that means this country still has a long way to go it also means that China’s economic potential remains enormous.

This is Stephen McDonell in Beijing for PM.