China Finance Official Touts Economy's 'New Normal'

     BEIJING (MNI) - One of China's top financial officials said Thursday that

the government was satisfied with the country's growth and that the economy had

entered into "a new normal" state -- slower, more sustainable development driven

by supply-side structural reforms and boosted by increased consumption and

innovation as well as progress in environmental protection.

     Yang Weimin, vice minister of the Office of the Central Leading Group on

Financial and Economic Affairs, a key policy body headed by President Xi

Jinping, said at a press conference on the country's economy hosted by China's

State Council that most of China's economic indicators had improved over the

past year, proving that "major judgments made by the Central Committee" of the

Communist Party in relation to the economy "have been completely correct." 

     But Yang warned that China needs "to see the achievements as well as the

challenges" ahead for the economy, emphasizing that the country "will not fall

into the so-called middle-income trap" -- where economic growth slows after a

country achieves a certain average level of income.

     To avoid an economic quagmire, Yang said, the government will continue to

deepen supply-side structural reform and allow consumption to play a leading

role in driving economic growth. 

     Despite the overall sound condition of the economy at the moment, Yang

said, China faces a number of challenges -- preventing financial risks, taming

the overheated housing market and reining in rising costs faced by companies,

among others.  

     Yang also pointed to debts held by local governments and state-owned

enterprises (SOEs) as key systemic financial risks that would need to be

resolved for China to maintain economic stability while pursuing "prudential

monetary policy." 

     "Looking at one particular risk point, for example local government

financing vehicles or individual defaults of state-owned enterprises, these

could be minor or trial risk points, but we need to identify them," Yang said.

"Identify them early and treat them early to prevent minor shocks from becoming

major shocks."

     Yang said that during the deleveraging process, the government would

prioritize the restructuring of state-owned enterprises and continue to follow

"legal and market-driven solutions" to make the SOEs more competitive. 

     Wang Zhijun, senior economist at the Leading Group on Financial and

Economic Affairs, said at the press conference that supply-side restructuring

among SOEs in the steel and iron sector had been especially effective, greatly

reducing overcapacity.

     Wang said the main driver for China's economic growth in the period ahead

would be consumption, which he said contributed 63.4% to the economic growth

rate of 6.9% during the first half of the year.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com

--MNI BEIJING Bureau; +1 202-371-2121; email: john.carter@mni-news.com

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