China 'to add more to global growth'

China's contribution to the global economy will continue to increase this year, remaining a major engine for world growth, a senior economist from a top government think tank said on Thursday. A sharp drop in GDP growth, or a hard landing, is unlikely in the second half of the year, Wang Yiming, vice-president of the Academy of Macroeconomic Research under the National Development and Reform Commission, said at a news conference. Wang also said the 7.5 percent growth target for the year will be achieved, with an inflation rate of less than 3 percent. Ongoing reforms will further strengthen sustainability of the Chinese economy, Wang said. "Depening the rebalancing of reform is the key to upgrading the economic growth pattern," Wang said, adding that the Third Plenary Session of the 18th CPC Central Committee, expected to convene in October, will give a framework for the overall reform design. After the session, reform progress is likely to be faster than expected, he said. Since taking office in March, the new central leadership has introduced market-oriented reforms in a wide range of areas, from cutting tax to easing controls in the financial sector. The central bank scrapped the lower limit on bank lending rates last month, a step toward liberalizing interest rates. The government has also suspended business tax and value-added tax for small and medium-sized enterprises. Wang said it is crucial to keep GDP growth within a reasonable range in the second half, although China's double-digit potential growth rate has fallen to between 7 and 8 percent. "We are able to control the potential risks in local government debt and the financial system," he said. In the second quarter, GDP growth in the world's second-largest economy slowed to 7.5 percent from 7.7 percent in the first. On Thursday, the National Bureau of Statistics said the July purchasing managers index hit 50.3, up from a five-month low of 50.1 in June. This ended a decline for three consecutive months, indicating that the manufacturing sector, which accounts for about 40 percent of overall GDP, is expanding at a moderate pace. It was the 10th month running in which the index reading stayed above 50, the point that separates expansion from contraction. The PMI figures shored up the stock market on Thursday, with the Shanghai Composite Index increasing by 1.8 percent to 2,029.07, the largest rise for a week. The shares of about 40 enterprises on the Shanghai and Shenzhen exchanges reached the 10 percent daily increase ceiling. Wang Tao, chief China economist at UBS, said the country is likely to achieve 7.5 percent growth this year, and a rebound may come in the third quarter. Wang doesn't expect visible policy stimulus measures in the second half, although the government has announced several fine-tuning measures to stabilize growth. Tao Dong, a senior economist in Hong Kong at Credit Suisse, said the government has the ability to shore up GDP growth and meet its target this year, but the figure is less important than improving the quality of economic development and efficiency. The growth rate, whether it is 7.5 percent or 7 percent, will still see China as one of the fastest developing economies in the world, he said. In the second half of this year, debt issues may continue to plague the eurozone unless the indebted countries take moves to redress fiscal balance; the Japanese economy seems to be losing momentum despite the strong stimulus; and the United States may see a slight rebound which could lead the Federal Reserve to start reducing quantitative easing from September, according t Tao. Zhang Bin, general manager of Shanghai Solid Stainless Steel Products, a manufacturer and exporter, said it is essential for the company to minimize production costs based on its own advantages.