China's economy slows as it makes room for reforms

China's economy slows as it makes room for reforms

CHINA - China's economy is slowing its pace as it enters the Year of the Horse, and there could be a bumpy ride ahead, say analysts.

This is because Chinese leaders are expected to implement an ambitious masterplan that focuses on the quality - rather than speed - of growth.

With the latest official manufacturing and services data signalling that the world's No.2 economy is already losing momentum, the key question now is by exactly how much growth could slacken this year.

Clue-seeking analysts say they will be watching how aggressively President Xi Jinping will move on three key economic priorities for this year: Restructuring the economy to boost domestic consumption, reforms to boost the role of market forces and rein in state monopolies, and reducing China's debt levels.

These areas are among the most urgent tasks needed to ensure China's growth moderates without a spike in financial risks, observed Fudan University professor Chen Xuebin.

State Information Centre economist Niu Li added that they are also "crucial parts of the new reform agenda that the new Chinese leadership laid out during the third plenum".

Reforms include shifting the economic structure away from state investment and exports towards domestic consumption, and rolling back state monopolies. Beijing also pledged to "control local government debt risk".

Many of the plenum's reforms will likely impact growth negatively in the near term, JP Morgan economist Zhu Haibin observed in a note. He expects this year's growth to ease to 7.4 per cent - a level that matches the median forecast in a Reuters poll.

This 7.4 per cent pace would be the lowest in 24 years.

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