Reviewing the first half of the year, China's economy has weathered the storm and improved. In the first quarter, economic growth slowed to 7.4%, drawing widespread attention from policymakers and various sectors. Analysts believe this growth rate is still within a reasonable range, but downward pressure on the economy remains. According to incomplete statistics, since April, the government has introduced at least 17 micro-stimulus measures to stabilize growth. As policies are implemented and take effect, economic data for May and June began to improve, and a consensus has emerged that the economy is stabilizing and recovering. Experts believe the second quarter will be better than the first.

First-quarter growth fell to 7.4%, downward pressure persists

Data from the National Bureau of Statistics show that in the first quarter, China's GDP was 12.8213 trillion yuan, a year-on-year increase of 7.4%, down 0.3 percentage points from the fourth quarter of last year. This growth rate is the lowest since the third quarter of 2012 and also below the government's annual growth target of 7.5% set at the beginning of the year.

Regarding the reasons for the slowdown, Sheng Laiyun, spokesperson for the National Bureau of Statistics, analyzed that it is mainly reflected in three aspects: first, the external environment remains complex and severe; second, China is in a phase of overlapping "three periods," namely the economic growth shifting period, the painful period of structural adjustment, and the digestion period of previous stimulus policies; third, it is the result of the government's proactive regulation.

Although the first-quarter growth continued to slow, it was still slightly higher than the market expectation of 7.3%. Moreover, experts unanimously believe that this growth rate is still within a reasonable range. Cao Fengqi, director of the Finance and Securities Research Center at Peking University, told the China News Service Finance Channel that China is currently in a period of transition and structural adjustment, and a slowdown in economic growth is normal. A growth rate of 7.4% is within the normal growth range and reasonable interval.

Xu Hongcai, director of the Information Department of the China Center for International Economic Exchanges, also said during an interview on the China News Service video program that a growth rate of 7.4% in the first quarter is still within a reasonable range. The policy target for this year is around 7.5%, and anything between 7% and 8% is reasonable. Employment is the core of economic growth, and stabilizing growth is more reflected in ensuring employment. From the employment perspective, employment did not decline in the first quarter due to the economic slowdown. Data show that more than 3 million new urban jobs were created in the first quarter.

"The economy was within a reasonable range in the first quarter, but downward pressure remains significant," said Fan Jianping, chief economist of the State Information Center. On the one hand, this comes from the impact of medium- and long-term structural factors; on the other hand, there are sequelae from previous stimulus policies, mainly manifested in severe overcapacity that directly led to a 25-month consecutive decline in PPI, which will have a significant adverse impact on corporate profits and downstream investment enthusiasm.

Sheng Laiyun also emphasized that at the same time, it should be noted that the external environment remains complex and volatile, and the domestic economy still faces certain downward pressure. In fact, downward pressure is not only at the national level; local economies also face considerable downward pressure. Except for Anhui, whose growth rate was higher than the annual target, the other 30 provinces' first-quarter GDP growth rates fell short of their annual targets. The economic growth rates of 29 provinces slowed compared with the same period last year. Hebei and Heilongjiang even fell below 5%.

Stabilizing growth under the new normal of economic adjustment: micro-stimulus measures frequently intensified

Seeing China's economic slowdown, some overseas institutions have once again bet against China. Xu Hongcai told the China News Service Finance Channel that these people are simply alarmists. Fan Jianping also believes that the new economic situation cannot be viewed simply with "old eyes"; the "old method" of judging China's economic situation solely by industrial growth is no longer appropriate.

Regarding the current economic situation, President Xi Jinping first proposed the "new normal" during an inspection tour in Henan in May. Analysts say this new normal means economic adjustment and medium-to-high-speed growth. Cao Fengqi said that China is in a period of transition and structural adjustment, and the high-speed growth of the past is unlikely to reappear this year.

The government also anticipated the economic slowdown. Before the release of first-quarter data, Premier Li Keqiang emphasized at the Boao Forum for Asia annual conference that China would not adopt short-term strong stimulus policies for temporary economic fluctuations; it would both observe calmly and maintain resolve, and also plan ahead and take proactive actions.

To address downward risks, after the first-quarter data were released, the government began to introduce targeted micro-stimulus policies. According to incomplete statistics from the China News Service Finance Channel, in the two months from mid-April to mid-June, the State Council cumulatively introduced at least 15 major policies to promote stable economic operation.

On April 22, the State Council issued the "Several Opinions on Financial Services for the Development of Agriculture, Rural Areas and Farmers," emphasizing the need to enhance the capital market's ability to support agriculture, rural areas and farmers from three aspects, further improve the rural financial system, and reduce overall financing costs. On April 23, the State Council executive meeting determined policy measures to further implement enterprise investment autonomy and decided to launch a batch of projects encouraging social capital participation in infrastructure and other fields.

On April 25, the central bank lowered the RMB deposit reserve ratio for rural commercial banks in counties by 2 percentage points and for rural cooperative banks in counties by 0.5 percentage points. On April 30, Premier Li Keqiang chaired a State Council executive meeting to deploy work related to supporting stable growth and optimizing the structure of foreign trade and to determine policy measures to further promote employment and entrepreneurship among college graduates. The Ministry of Finance and the State Administration of Taxation issued a notice clarifying that the telecommunications industry would be included in the pilot program of replacing business tax with value-added tax starting June 1, 2014.

On May 9, the State Council issued the "Several Opinions on Further Promoting the Healthy Development of the Capital Market," aimed at better leveraging the capital market's role in optimizing resource allocation and promoting innovation and entrepreneurship, structural adjustment, and sustained and healthy economic and social development. On May 15, the State Council issued the "Several Opinions on Supporting Stable Growth of Foreign Trade" to stimulate market vitality, boost the confidence of foreign trade enterprises, and promote stable growth of imports and exports.

On May 16, the central bank, the China Banking Regulatory Commission, the China Securities Regulatory Commission, the China Insurance Regulatory Commission, and the State Administration of Foreign Exchange jointly issued the "Notice on Regulating Interbank Business of Financial Institutions" to guide more funds to flow into the real economy, reduce corporate financing costs, and improve the financial system's ability to support the real economy. On May 30, the State Council deployed the implementation and strengthening of financial support for the real economy and proposed four measures to further reduce and standardize enterprise-related fees and lighten the burden on enterprises.

Recently, micro-stimulus policies have continued to intensify. On June 16, the central bank again implemented targeted reserve requirement cuts, lowering the deposit reserve ratio by 0.5 percentage points for commercial banks that meet prudent operating requirements and have reached a certain proportion of loans to agriculture, rural areas and farmers and small and micro enterprises, as well as for finance companies, financial leasing companies, and auto finance companies. On June 30, the China Banking Regulatory Commission adjusted the calculation basis for the loan-to-deposit ratio of commercial banks, subtracting six items including loans to agriculture, rural areas and farmers from the numerator. Industry insiders estimate that this policy will release at least 800 billion yuan of liquidity for the real economy.

Strict implementation of policies takes effect: clear signs of economic stabilization and recovery

To accelerate the implementation of policies and measures to stabilize growth, promote reform, adjust structure, and benefit the people, and to let enterprises and the public enjoy policy dividends, the State Council executive meeting on May 30 decided to conduct a comprehensive inspection of the implementation of policies and measures already issued by the State Council. The focus is on those with slow progress, to find causes and propose countermeasures, to connect the "first mile" and the "last mile" of implementation, to break through "midstream blockages," and to eliminate institutional obstacles affecting policy implementation.

On June 6, the State Council issued a notice deploying a comprehensive inspection of the implementation of policies and measures to stabilize growth, promote reform, adjust structure, and benefit the people. It is reported that this is the first comprehensive inspection by the State Council of the implementation of decisions, arrangements, and policies since the new government took office.

The effects of micro-stimulus policies gradually emerged in May. In addition to investment, a series of economic data began to rebound in May. China's manufacturing PMI in May was 50.8%, up 0.4 percentage points from April; the non-manufacturing PMI was 55.5%, up 0.7 percentage points from the previous month; export growth rebounded sharply from 0.9% in April to 7%; power generation growth accelerated by 1.5 percentage points month-on-month; total retail sales of consumer goods grew 12.5% year-on-year in nominal terms, up 0.6 percentage points from April; and the decline in PPI narrowed to 1.4%.

"Under a series of micro-stimulus measures, both the official and HSBC manufacturing PMIs rebounded, and exports, consumption, and industry all picked up, indicating that demand is increasing and the signs of overall economic recovery are more obvious than last month," said Cao Heping, economist and former vice dean of the School of Economics at Peking University, in an earlier interview with the China News Service Finance Channel.

The latest data further confirm the stabilizing and recovering trend of China's economy. On July 1, the National Bureau of Statistics announced that China's manufacturing PMI in June was 51%, rising for the fourth consecutive month, indicating that manufacturing has maintained a good momentum of steady growth. The final HSBC China PMI for June announced the same day was 50.7, standing above the boom-or-bust line for the first time this year and returning to expansion territory.

Economists analyze that these data show the government's micro-stimulus policies are beginning to take effect, and the growth-stabilizing effect was very obvious in June. Zhou Jingtong, senior analyst at the Strategic Development Department of Bank of China, told the China News Service Finance Channel that based on the data for May and June, the second-quarter economy will definitely be better than the first quarter.